Audit

The Senate “infrastructure” deal endorsed by President Joe Biden will give the IRS $40 billion in new taxpayer funding to audit and harass taxpayers including American families and small businesses. This new funding should be alarming given the IRS has a history of incompetence and corruption. In fact, just a few weeks ago, the progressive group ProPublica announced it had the tax returns of thousands of taxpayers stretching back 15 years. This sensitive taxpayer data was either obtained through an unauthorized leak by an IRS employee or through a data breach – either way the IRS failed to safeguard taxpayer information.

The purpose of this new IRS funding is not to help taxpayers navigate the tax code or receive better customer service, but to raise $100 billion in new revenues. The Wall Street Journal rightly described this proposal as a “Bipartisan Pact to Supersize the IRS.”

This spending is also just the first step in the Democrat goal to dramatically expand the IRS. President Biden has proposed $80 billion in new funding for the agency and could include additional funding in a second piece of legislation that he wants Congress to pass through budget reconciliation.

New IRS enforcement will fall on American families and small businesses, not the “rich.”

The wealthy and large corporations already have armies of lawyers and accountants that ensure they legally take advantage of the plethora of credits and deductions offered by the tax code. In fact, as noted by Donald Williamson, a tax professor at American University’s Kogod School of Business, small businesses are already disproportionately targeted by the IRS:

“… most audits are not random… the IRS has a secret algorithm for determining how likely each taxpayer is to have unreported income. Employing this calculus, the IRS has concluded that small businesses are less likely to be paying their fair share of taxes relative to much larger enterprises, a surprising conclusion in light of frequent press reports of multi-national corporations allocating billions of dollars of profits to no- or low-tax jurisdictions to avoid U.S. income taxation.”

While this new funding will increase enforcement, there has been little or no mention of increasing the IRS’s woeful customer service.  Every year the IRS hangs up on millions of taxpayers calling for assistance – a practice they refer to as “Courtesy Disconnects.” Currently, if you call the IRS, you have a 1-in-50 chance of reaching a human being. Rather, the purpose of this funding is to literally squeeze more tax revenue out of the American people.  

Before giving the IRS a single new penny, the agency needs reform to ensure it is properly doing its job to help taxpayers navigate the tax code and is not targeting taxpayers or failing to protect sensitive data.

In recent years, there have been numerous cases illustrating how the IRS is corrupt or incompetent. For instance:

  • A 2015 report compiled by the Senate Finance Committee found that Lois Lerner’s political beliefs led to tea party and conservative groups receiving disparate and unfair treatment when applying for non-profit status. Because of Lerner’s bias, only ONE conservative organization was granted tax exempt status over a period of more than three years:

 

“Due to the circuitous process implemented by Lerner, only one conservative political advocacy organization was granted tax-exempt status between February 2009 and May 2012. Lerner’s bias against these applicants unquestionably led to these delays,and is particularly evident when compared to the IRS’s treatment of other applications, discussed immediately below.”

  • A 2015 report by the House Oversight Committee found that the IRS destroyed 422 backup tapes containing 24,000 emails belonging to Lois Lerner. The tapes were magnetically “degaussed” despite an agency-wide preservation order and congressional subpoena. Degaussing is a process whereby powerful magnets are used to erase data on a storage tape.

  • The agency has repeatedly failed to compile legally required tax complexity reports. These reports are supposed to contain the IRS’s specific recommendations on how to make the tax code easier to comply with. Since 1998, the IRS has done so just twice – in 2000 and 2002.    

  • A TIGTA report on the 2021 Filing Season found that almost 40 percent of printers were not working at tax processing centers in Ogden, Utah and Kansas City, Missouri. However, in many cases the only thing wrong with the printers is that no employee had replaced the ink or emptied the waste cartridge container: “IRS employees stated that the only reason they could not use many of these devices is because they are out of ink or because the waste cartridge container is full.”

  • This year, despite having funding for new hires, the IRS only achieved 37 percent of their hiring goal. They had trouble onboarding new hires as well, as it was “difficult to find working copiers (as noted previously) to be able to prepare training packages.”

  • In 2016, the IRS has lost track of laptops containing sensitive taxpayer data. TIGTA estimates that the IRS had failed to properly document the return of 84.2 percent, or more than 1,000 computers due to be returned by contract employees.

  • A TIGTA report in 2017 showed that the IRS rehired more than 200 employees who were previously employed by the agency, but fired for previous conduct or performance issues.

  • Each year the IRS hangs up on millions of callers — a practice they refer to as “Courtesy Disconnects.” Currently, if you call the IRS, you have a 1-in-50 chance of reaching a human being.

  • According to the National Taxpayer Advocate’s 2014 Annual Report to Congress the IRS was unable to justify spending decisions. As the report stated: “The IRS lacks a principled basis for making the difficult resource allocation decisions necessitated by today’s tight budget environment.”

  • The IRS has repeatedly failed to include required information on notices they send to taxpayers, thus eroding taxpayers’ ability to understand said notices, figure out the right office/number to correspond with, file appeals, etc.

  • A 2020 National Taxpayer Advocate Report noted that the IRS union contract requires the agency to first consider internal applicants before hiring externally. This requirement leads to a “waste of time and resources” and often results in the agency “shuffling existing employees around.”

  • The IRS is required by law to assign a single employee to each taxpayer’s case for mutually generated correspondence, and, in more cases than not, fails to do so.

  • In 2015, the IRS was spending $1,000 an hour hiring a litigation-only white shoe law firm for an investigation, despite having over 40,000 employees dedicated to enforcement efforts.

  • In 2015, the agency has been caught red-handed wasting taxpayer dollars on Nerf footballs, the world’s largest crossword puzzle, extravagant $100 dollar lunches, and more.

$40 billion in additional funding will lead to the increased harassment of small businesses and American families. It would also fund the incompetence and corruption that runs rampant within the agency.