Congress Should Pass the Preserving Taxpayers Rights Act

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Posted by Alex Hendrie on Thursday, July 20th, 2017, 8:00 AM PERMALINK

In recent years, the IRS has proven again and again that it is incapable of doing its job. This failure is due to both the increasing politicization of the agency, as well as the ineptitude of IRS management.

Recently, government watchdog groups have found the IRS mispaid 31% of their employees, gave bonuses to tax delinquent employees, shortchanged taxpayers by $1.2 million, lost track of computers with sensitive taxpayer information on them, and wasted $12 million on an unstable email system.  

One of the strangest blunders by the IRS was the agency’s insistence on hiring Quinn Emanueal, an elite, litigation-only, white shoe law firm to audit tech company Microsoft. The agency did so despite having the capability to handle this audit without hiring private contractors.

Already, the IRS has roughly 40,000 employees responsible for enforcement and auditing. In addition, the agency has access to the services of the office of Chief Counsel or a Department of Justice attorney, both of which would have had the expertise to conduct this kind of work without putting sensitive information at risk.

Instead, the IRS hired a law firm with zero prior experience handling sensitive tax data, leaving taxpayers to foot a $1,000 per hour bill. This unusual decision promoted an investigation from Senate Finance Chairman Orrin Hatch (R-Utah) over concerns that the hiring of the firm was wasting taxpayer resources, and that there were significant risks of using private contractors for the examination of records and handling of sworn testimony.

Bizarrely, it was determined that the IRS hiring this outside firm did not break any laws, and it still remains legal for the agency to hire unqualified and expensive outside counsel today. This decision should be troubling for all taxpayers as it shows the lack of protections in place.

Last week, Members of Congress introduced legislation that would fix this problem and ensure sensitive taxpayer information is protected. The “Preserving Taxpayers’ Rights Act,” introduced by Congressman Jason Smith (R-MO) puts in a number of guardrails around the IRS so that the agency cannot abuse or abrogate its duty to taxpayers:

-First, this legislation ensures taxpayers have an explicit legal right to have their case heard by the independent and impartial IRS Office of Appeals. This will ensure disputes between taxpayers and the IRS are addressed in a timely, efficient and cost-saving manner.

-Second, the bill limits the IRS’s ability to designate cases for litigation to situations where tax abuse is a recurring, significant legal issue affecting a large number of taxpayers.

-Third, the bill limits the ability of the agency to use designated summonses to situations where a taxpayer is being uncooperative and refusing to comply with a request to provide information.

-Fourth, and most importantly, the legislation eliminates the IRS’s ability to outsource a taxpayers’ audit to a private entity. This will better protect sensitive taxpayer information and ensure taxpayer funds cannot be wasted.

These reforms will ensure that the IRS is not able to abuse the auditing process, and that they must instead follow a system that is transparent, efficient, and protects sensitive taxpayer information.

Reigning in power and eliminating provisions that encourage abuses of power to happen are the critical first steps to reforming the IRS. ATR urges all Members of Congress to support this commonsense, bipartisan legislation and encourages its swift passage. 

Photo Credit: Dustin Gaffke