TIGTA: IRS Fails to Ensure That Defendants Convicted of Tax Crimes Actually Pay Taxes Owed

The Treasury Inspector General for Tax Administration today released Procedures Are Needed to Improve the Accounting and Monitoring of Restitution Payments to Prevent Erroneous Refunds (2012-30-012):

When a defendant pleads guilty or is found guilty of a tax-related crime, the terms of a defendant’s sentence can include various combinations of imprisonment, probation, and monetary penalties such as fines and restitution. Probation and restitution act to discourage similar criminal violations by others. However, the perception has grown that many defendants, despite being convicted of violating the tax laws, are escaping all responsibility for the payment of the taxes associated with the offenses they committed. ...The IRS does not have effective internal controls to ensure defendants convicted of tax-related crimes comply with conditions of probation and restitution. Specifically, the IRS’s inability to properly account for restitution payments resulted in the issuance of erroneous refunds to three defendants and 16 taxpayers totaling approximately $543,000. In addition, the IRS’s systems for monitoring defendants’ compliance with the conditions of probation and restitution are neither effective nor reliable. TIGTA’s analysis of data used to monitor defendants identified inaccurate tax account data totaling approximately $330,000 for 25 defendants. TIGTA also determined that Criminal Investigation inconsistently used the refund offset procedure to collect restitution payments. Finally, the IRS was not always granted restitution by the courts in cases where it appeared to be warranted.