Serious internal control flaws mean the IRS may still be unfairly selecting Americans for an audit “based on an organization’s religious, educational, political, or other views,” according to a pair of reports released by the Government Accountability Office (GAO) today.
As GAO notes, certain deficiencies increase the risk of unfair audit selection based on a taxpayer’s First Amendment rights. As the report finds:
“The control deficiencies increase the risk of selecting organizations for audit in an unfair manner—for example, based on an organization’s religious, educational, political, or other views.”
GAO audited Wage & Investment (W&I) and Small Business/Self-employed (SB/SE) divisions in response to a request from House Ways & Means Committee members led by Chairman Kevin Brady (R-Texas) and Oversight Subcommittee Chairman Peter Roskam (R-Ill.).
These requests were made in response to IRS targeting conservative groups. This targeting resulted in just one conservative non-profit being granted tax exempt status over a three year period.
As Chairman Brady and Roskam note, selection flaws mean the IRS is failing to apply tax law in a fair and equitable manner. The Ways & Means Committee summarized the findings of each report, as found below:
- GAO found that the IRS does not have strong internal controls and did not have consistent procedures for documenting audit selection decisions, which increases the risk of unfair audit selection.
- GAO concluded that “the lack of strong control procedures increases the risk that the audit program’s mission of fair and equitable application of the tax laws will not be achieved.”
- Similar to the other business units, GAO found that the Wage & Investment unit did not always document how cases were selected for audit.
- GAO found that the IRS did not provide support for changes in selection processes and procedures.
- GAO also found that the IRS does not conduct continuous reviews of its audit selections, and instead only reviews it once a year.
- GAO concluded that internal controls should be strengthened to “provide greater assurance that W&I is fulfilling its mission to select tax returns with fairness and integrity.”