TaxProf Blog

The IRS Scandal, Day 14

• Blog of the Legal Times:  Zuckerman Lawyer Counsels IRS Official in Congressional Probe
• Bloomberg:  IRS’s Lerner May Have Waived Rights at Hearing, Issa Says
• Card Hub:  Ask The Experts: What to Make of the IRS "Tea Party" Scandal
• Foley & Lardner (Washington D.C.), IRS Targeting of Conservative Groups: A History, Overview and Status Report 
• The Hill:  Issa May Haul IRS’s Lerner Back
• The Hill:  Tempers Flare as GOP Questions Lew Over IRS Targeting Timetable
• National Review:  A Fifth of Obama
• National Review:  Firing Lois Lerner: Not Impossible, But Almost 
• National Review:  It Didn’t End: The IRS Is Still Stringing Conservative Groups Along
• National Review:  A Person of Privilege? Lois Lerner Was Too Clever by Half
• New York Times:  IRS Official Invokes 5th Amendment at Hearing
• New York Times:  Remaining Silent on the IRS
• New York Times:  Torches and Pitchforks for IRS but Cheers for Apple
• Politico:  Daniel Werfel, New IRS Chief, Says Agency Needs to Regain Public’s Trust
• Politico:  Darrell Issa Slams IRS Watchdog
• Politico:  Marco Rubio Calls for More IRS Hearings
• The Progressive Farmer:  Tea Party Isn't Only IRS Victim
• Wall Street Journal:  Did Lois Lerner Forfeit Her Fifth Amendment Privileges?
• Wall Street Journal:  Emails Offer New Details on IRS Targeting
• Wall Street Journal:  IRS’s Lerner Testimony: ‘I Did Not Break Any Laws’
• Wall Street Journal:  Why Did Lois Lerner Take the Fifth? Perhaps to Protect Herself from Obama
• Washington Post:  Former IRS Official Won’t Take Responsibility, by Dana Milbank
• Washington Post:  Lois Lerner Invokes Fifth Amendment, Says She Did Nothing Wrong
• Washington Post:  On IRS issue, Senior White House Aides Were Focused on Shielding Obama
• Weekly Standard:  Congressman Worries About 'Chilling Effect' of Scandal -- On IRS!
• Weekly Standard:  Liberals Turn on Lois Lerner, IRS
• Weekly Standard:  Dem. Rep.: 'There Will Be Hell to Pay' If IRS Doesn't Cooperate, Threatens 'Special Prosecutor'
• Wilmington News Journal op-ed:  Why the IRS Scandal Is Both Not as Bad, and Also Much Worse, Than It Seems, by Jan C. Ting (Temple)

Prior TaxProf Blog coverage:

• IRS Admits to Targeting Conservative Groups in 2012 Election (May 10, 2013)
• WaPo and WSJ Agree: IRS Targeting of Conservatives Is Appalling (May 11, 2013)
• Schmalbeck on the IRS 'Targeting' of Conservative Groups (May 12, 2013)
• The Deepening IRS Scandal (May 13, 2013)
• The IRS Scandal, Day 5 (May 14, 2013)
• Jon Stewart and Vic Fleischer on the IRS Scandal (May 14, 2013)
• Inspector General: Ineffective IRS Management Allowed Agents to Target Conservative Groups (May 14, 2013)
• The IRS Scandal, Day 6 (May 15, 2013)
• Ellen Aprill, The TIGTA Report on the IRS Scandal: Questions About the IRS and About the Report (May 15, 2013)
• Phillip Hackney, The TIGTA Report on the IRS Scandal: Be on the Lookout for False Partisan Witchunts (May 15, 2013)
• The IRS Scandal, Day 7 (May 16, 2013)
• The IRS Scandal, Day 8 (May 17, 2013)
• The IRS Scandal, Day 9 (May 18, 2013)
• The IRS Scandal, Day 10 (May 19, 2013)
• SNL on the IRS Scandal (May 19, 2013)
• The IRS Scandal, Day 11 (May 20, 2013)
• The IRS Scandal: Really?! (May 20, 2013)
• The IRS Scandal, Day 12 (May 21, 2013)
• Steven Colbert on the IRS Scandal (May 21, 2013)
• The IRS Scandal, Day 13 (May 22, 2013)

The IRS Scandal, Day 13

• Richard Epstein (NYU), The Real Lesson of the IRS Scandal
• ABC News:  First Conservative Groups File Suit Against IRS
• ABC News:  IRS ‘Blemish’ Prompts Scorn From Unappeased Senators
• Bloomberg:  Shulman’s Above-Fray Posture to Get Test From Issa in IRS Probe
• Bloomberg:  Sympathy for the IRS
• FactCheck.org:  Republican Overreach on IRS
• The Hill:  White House, Treasury Discussed How to Handle Disclosure of IRS Story
• L.A. Times:  IRS Officials Still Don't Have Full Explanation of Targeting
• L.A. Times:  IRS' Last Two Commissioners Deny Lying; Official to Take the 5th
• National Review:  Is the IRS Too Bog to Jail?
• National Review:  The Pinocchio Administration
• National Review:  True the Vote Files Suit Against the IRS
• National Review:  Washington All Along: D.c. Knew Exactly What Cincinnati Was Doing
• NBC News:  Ex-Cincy IRS Official Doubts Agency's Explanation for Tea Party Scandal
• New York Times op-ed:  Bring Back Ken Starr to Investigate IRS, by Bill Keller
• New York Times:  IRS Official Will Decline to Testify Before House Panel
• Politico:  Former IRS Chief Doug Shulman 'Dismayed' at Targeting
• Politico:  IG to Conduct New IRS Probe
• Politico:  White House Reveals New IRS Details
• Slate:  Stop Hating on the IRS, by Emily Bazelon
• Time:  Despite President Obama’s Optimism, No Quick Fix Likely For IRS
• U.s. News & World Report:  IRS, Congress Point Fingers About Who is to Blame for Scandal
• Wall Street Journal:  Activists Saw Vindication As IRS Controversy Erupted
• Wall Street Journal:  Director of IRS Unit Says She Won't Testify
• Wall Street Journal:  No Apologies From Former IRS Chief
• Wall Street Journal:  Spokesman: Obama Agrees With Counsel’s IRS Decision
• Wall Street Journal:  U.S. Treasury Was Told in Late April That IRS Officials Mulled Apology
• Washington Post:  Douglas Shulman Won’t Apologize — Yet, at Least
• Washington Post:  Internal IRS Probe Cited Same Problems With Approach to Conservative Groups in May 2012, House Aide Says
• Washington Post:  IRS Official Lois Lerner to Take the Fifth
• Washington Post:  IRS Scandal Focus of Senate Hearing
• Washington Post:  Watchdog Group Sues IRS for Stricter Tax-Exemption Rules
• Washington Post:  With More Clarity, White House Adds to Confusion on IRS

Prior TaxProf Blog coverage:

• IRS Admits to Targeting Conservative Groups in 2012 Election (May 10, 2013)
• WaPo and WSJ Agree: IRS Targeting of Conservatives Is Appalling (May 11, 2013)
• Schmalbeck on the IRS 'Targeting' of Conservative Groups (May 12, 2013)
• The Deepening IRS Scandal (May 13, 2013)
• The IRS Scandal, Day 5 (May 14, 2013)
• Jon Stewart and Vic Fleischer on the IRS Scandal (May 14, 2013)
• Inspector General: Ineffective IRS Management Allowed Agents to Target Conservative Groups (May 14, 2013)
• The IRS Scandal, Day 6 (May 15, 2013)
• Ellen Aprill, The TIGTA Report on the IRS Scandal: Questions About the IRS and About the Report (May 15, 2013)
• Phillip Hackney, The TIGTA Report on the IRS Scandal: Be on the Lookout for False Partisan Witchunts (May 15, 2013)
• The IRS Scandal, Day 7 (May 16, 2013)
• The IRS Scandal, Day 8 (May 17, 2013)
• The IRS Scandal, Day 9 (May 18, 2013)
• The IRS Scandal, Day 10 (May 19, 2013)
• SNL on the IRS Scandal (May 19, 2013)
• The IRS Scandal, Day 11 (May 20, 2013)
• The IRS Scandal: Really?! (May 20, 2013)
• The IRS Scandal, Day 12 (May 21, 2013)
• Steven Colbert on the IRS Scandal (May 21, 2013)

2013 Tax Filing Season: Processing, Refunds Down; e-File, IRS Web Site Use Up

IR-2013-52, More Taxpayers e-file from Home in 2013 (May 20, 2013):

Cumulative statistics comparing 5/11/12 and 5/10/13
Individual Income Tax Returns:	2012		2013		% Change
Total Receipts	135,473,000		134,349,000		-0.8
Total Processed	130,261,000		129,674,000		-0.5
E-filing Receipts:
TOTAL	112,089,000		113,954,000		1.7
Tax Professionals	70,344,000		70,380,000		0.1
Self-prepared	41,745,000		43,574,000		4.4
Web Usage:
Visits to IRS.gov	255,269,615		318,408,842		24.7
Total Refunds:
Number	102,522,000		101,082,000		-1.4
Amount	$277.180	Billion	$267.946	Billion	-3.3
Average refund	$2,704		$2,651		-2.0
Direct Deposit Refunds:
Number	79,308,000		79,880,000		0.7
Amount	$231.656	Billion	$228.467	Billion	-1.4
Average refund	$2,921		$2,860		-2.1

The IRS Scandal, Day 12

• Above the Law:  On the IRS Mess and What It Means to be a Lawyer
• American Spectator:  Obama and the IRS: The Smoking Gun?
• Bloomberg:  Obama’s Defense in IRS Case Is Pre-Election Ignorance
• CBS News:  Evidence Emerges that Obama Administration Official Knew of IRS Targeting During 2012 Campaign
• Dorf on Law:  Two Broader Lessons of the IRS/Tea Party "Scandal", by Mike Dorf (Cornell)
• The Hill:  Poll: Majority Believe IRS Targeting of Tea Party Was Intentional
• Human Events:  IRS and AP Scandals Cast a Big Chill on Free Speech, by Michael Barone
• Human Events:  White House Defends IRS Chief-Turned-ObamaCare Enforcer, by John Hayward
• Rush Limbaugh:  Goal of the IRS Scandal: Scare GOP Donors
• National Review:  Congress Audits its Own
• New York Times:  IRS Scandal: Questions and Answers
• Politico:  The White House’s Shifting IRS Account
• Wall Street Journal op-ed:  The IRS and the Drive to Stop Free Speech, by David Rivkin & Lee Casey
• Washington Post op-ed:  IRS Scandal Inspires a Kafka-esque Tale, by Richard Cohen
• Washington Post:  A bushel of Pinocchios for IRS’s Lois Lerner
• Weekly Standard:  IRS's Lerner Had History of Harassment, Inappropriate Religious Inquiries at FEC

Prior TaxProf Blog coverage:

• IRS Admits to Targeting Conservative Groups in 2012 Election (May 10, 2013)
• WaPo and WSJ Agree: IRS Targeting of Conservatives Is Appalling (May 11, 2013)
• Schmalbeck on the IRS 'Targeting' of Conservative Groups (May 12, 2013)
• The Deepening IRS Scandal (May 13, 2013)
• The IRS Scandal, Day 5 (May 14, 2013)
• Jon Stewart and Vic Fleischer on the IRS Scandal (May 14, 2013)
• Inspector General: Ineffective IRS Management Allowed Agents to Target Conservative Groups (May 14, 2013)
• The IRS Scandal, Day 6 (May 15, 2013)
• Ellen Aprill, The TIGTA Report on the IRS Scandal: Questions About the IRS and About the Report (May 15, 2013)
• Phillip Hackney, The TIGTA Report on the IRS Scandal: Be on the Lookout for False Partisan Witchunts (May 15, 2013)
• The IRS Scandal, Day 7 (May 16, 2013)
• The IRS Scandal, Day 8 (May 17, 2013)
• The IRS Scandal, Day 9 (May 18, 2013)
• The IRS Scandal, Day 10 (May 19, 2013)
• SNL on the IRS Scandal (May 19, 2013)
• The IRS Scandal, Day 11 (May 20, 2013)
• The IRS Scandal: Really?! (May 20, 2013)

Senate Holds Hearing Today on The IRS Scandal

The Senate Finance Committee holds a hearing today on A Review of Criteria Used by the IRS to Identify 501(c)(4) Applications for Greater Scrutiny:

• Steven T. Miller (Former Acting Commissioner, IRS)
• J. Russell George (Treasury Inspector General for Tax Administration)
• Douglas Shulman (Former IRS Commissioner) 

Press and blogosphere coverage:

• The Hill, IRS Officials on Hot Seat at Senate Finance Committee
• New York Times, Senate Panel Asks IRS Chief to Detail Communications With White House
• Politico, Max Baucus, Orrin Hatch Expand IRS Probe
• Wall Street Journal, Bipartisan Push in Senate for IRS Documents
• Washington Post, Senators Ask Ex-IRS Chief to Detail Communications with White House

The IRS Scandal: Really?!

(Hat Tip: Ann Murphy.)

The IRS Scandal, Day 11

• Daily Beast:  The IRS Will Come for You Next, Unless Congress Acts Now
• Business Insider:  How One Overworked IRS Worker Ignited The Tea-Party Targeting Scandal
• Forbes:  6 Questions Everyone Should Ask the IRS, by Robert W. Wood
• The Hill:  Paul Ryan:  IRS Targeting Scandal Reveals ‘Big Government Cronyism’
• The Hill:  Rangel Worries Honest IRS Agents Are Now ‘Getting a Bad Shake’
• The Hill:  Sen. Portman: IRS Will Need Special Counsel
• New York Times:  The IRS King
• Politico:  Pfeiffer Defends IRS Handling
• Politico:  IRS Special Counsel Debated
• Wall Street Journal:  Obama's Counsel Told of IRS Audit Findings 
• Washington Examiner:  Anonymous Cincinnati IRS Official: “Everything Comes from the Top”
• Washington Post:  How the IRS Seeded the Clouds in 2010 for a Political Deluge Three Years Later
• Washington Post:  IRS Scandal: Fair play or Foul Play?
• Washington Post:  Obama Senior Adviser Blasts IRS
• Washington Times:  White House Aide: ‘Nothing That Suggests’ IRS Official at Center of Scandal 'Did Anything Wrong’

Prior TaxProf Blog coverage:

• IRS Admits to Targeting Conservative Groups in 2012 Election (May 10, 2013)
• WaPo and WSJ Agree: IRS Targeting of Conservatives Is Appalling (May 11, 2013)
• Schmalbeck on the IRS 'Targeting' of Conservative Groups (May 12, 2013)
• The Deepening IRS Scandal (May 13, 2013)
• The IRS Scandal, Day 5 (May 14, 2013)
• Jon Stewart and Vic Fleischer on the IRS Scandal (May 14, 2013)
• Inspector General: Ineffective IRS Management Allowed Agents to Target Conservative Groups (May 14, 2013)
• The IRS Scandal, Day 6 (May 15, 2013)
• Ellen Aprill, The TIGTA Report on the IRS Scandal: Questions About the IRS and About the Report (May 15, 2013)
• Phillip Hackney, The TIGTA Report on the IRS Scandal: Be on the Lookout for False Partisan Witchunts (May 15, 2013)
• The IRS Scandal, Day 7 (May 16, 2013)
• The IRS Scandal, Day 8 (May 17, 2013)
• The IRS Scandal, Day 9 (May 18, 2013)
• The IRS Scandal, Day 10 (May 19, 2013)

SNL on the IRS Scandal

The IRS Scandal, Day 10

• ABC News:  Republicans Informed of IRS Investigation Last Year
• Conglomerate:  The IRS Scandal: Does It Fit With The IRS Weltanschauung?, by David Zaring (Pennsylvania)
• Fox News:  Republicans: IRS Scandal Shows Agency 'Rotten at the Core,' Needs Major Reform
• Fox News op-ed;  Watergate 2.0 -- Why the IRS Scandal Is Far Worse, by Mike Kibbe(Freedom Works)
• The Hill:  Complaints of IRS targeting by Religious Groups on the Rise
• The Hill:  Dem: Ex-IRS Chief Lied to Congress
• The Hill:  Ways and Means Chairman: 'We Need to Dig a Lot Deeper' on IRS Scandal
• Houston Chronicle:  Inside the Scandal: How the IRS’ Nonprofit Division Got So Dysfunctional
• L.A. Times:  How the IRS Spun Out of Control
• New York Times:  Confusion and Staff Troubles Rife at IRS Office in Ohio
• New York Times:  Government's Worst Face
• New York Times op-ed;  Hard of Hearings, by Gail Collins
• NPR:  Nonconservative Groups Say IRS Scrutinized Them, Too
• Politico:  5 Fixes for the IRS
• Politico:  Jack Lew Learned of IRS probe in March
• Politico:  Jindal: IRS Officials Deserve Prison
• Politico:  Ousted IRS Chief Steven Miller Defiant as GOP Attacks
• USA Today:  Planted Question Gambit Backfires on IRS Officials
• Wall Street Journal:  Former IRS Division Chief Predicts Wave of Departures
• Wall Street Journal:  Question to IRS Official Was Planted
• Wall Street Journal:  The Odd Case of the Planted IRS Question
• Washington Post:  ‘Who’s Going to Jail’ Over IRS Scandal? Probably Nobody
• Weekly Standard:  Ideological Revenue Service

Prior TaxProf Blog coverage:

• IRS Admits to Targeting Conservative Groups in 2012 Election (May 10, 2013)
• WaPo and WSJ Agree: IRS Targeting of Conservatives Is Appalling (May 11, 2013)
• Schmalbeck on the IRS 'Targeting' of Conservative Groups (May 12, 2013)
• The Deepening IRS Scandal (May 13, 2013)
• The IRS Scandal, Day 5 (May 14, 2013)
• Jon Stewart and Vic Fleischer on the IRS Scandal (May 14, 2013)
• Inspector General: Ineffective IRS Management Allowed Agents to Target Conservative Groups (May 14, 2013)
• The IRS Scandal, Day 6 (May 15, 2013)
• Ellen Aprill, The TIGTA Report on the IRS Scandal: Questions About the IRS and About the Report (May 15, 2013)
• Phillip Hackney, The TIGTA Report on the IRS Scandal: Be on the Lookout for False Partisan Witchunts (May 15, 2013)
• The IRS Scandal, Day 7 (May 16, 2013)
• The IRS Scandal, Day 8 (May 17, 2013)
• The IRS Scandal, Day 9 (May 18, 2013)

The IRS Scandal, Day 9

• Bloomberg:  Former IRS Commissioner Shulman Will Testify May 22
• Bloomberg:  IRS Answers Leave Unsatisfied Republicans
• Bloomberg:  IRS Wrote Lawyer’s Question That Prompted Scandal Disclosure
• CNN op-ed;  IRS Scandal Is About Donors, Not Tax, by Roger Colinvaux (Catholic)
• Election Law Blog:  Dept. of Profoundly Dumb PR Moves: IRS Edition, by Rick Hasen (UC-Irvine)
• FactCheck.org:  IRS Not So ‘Independent’
• Human Events:  Barack Obama Not Outraged; He Adores the IRS
• Human Events:  Official in Charge of Corrupt IRS Department Promoted – To Top ObamaCare Enforcer
• L.A. Times:  IRS Problem Started with Vague Tax Exemption Rules
• Legal Ethics Forum:  IRS Scandal: Where Were the IRS and WH Lawyers?, by John Steele (Santa Clara)
• Legal Insurrection:  IRS Planted Question at ABA Meeting Disclosing Targeting of Conservatives, by WIlliam Jacobson (Cornell)
• Legal Insurrection:  Questioner Initially Denied IRS Q&A Was Set Up, by William Jacobson (Cornell)
• Mother Jones:  Blame Congress For the IRS-Tea Party Mess
• National Review:  Gotta Be a Special Counsel: Only Way to Clean Up the IRS Rat’s Nest
• National Review:  Hearing Out the IRS: Congress Is Far From Satisfied
• New York Times:  Republicans Expand IRS Inquiry, With Eye on White House
• New York Times DealBook: Where the IRS Investigation May Go From Here, by Peter J. Henning (Wayne State)
• New York Times FiveThirtyEight Blog: New Audit Allegations Show Flawed Statistical Thinking, by Nate Silver
• Real Clear Politics:  Benghazi and IRS Targeting: Politics by Other Means, by Michael Barone
• Real Clear Politics:  GOP Congressman Receives Standing Ovation After He Rips IRS Commissioner
• Tax Analysts Blog:  Lois Lerner Must Resign, by David Cay Johnston (Syracuse)
• Tax Analysts Blog:  Scandal, Scandal, Scandal, by Christopher Bergin (Tax Analysts)
• Wall Street Journal editorial:  Merely a Tax Misunderstanding: IRS Agents Just Wanted to be 'More Efficient'
• Wall Street Journal:  At Hearing, the Venting Is Bipartisan
• Wall Street Journal:  Higher-Ups Knew of IRS Case 
• Wall Street Journal:  IRS Timeline: What We Know So Far
• Wall Street Journal:  President Asterisk:  Why the Obama IRS Scandal may be Worse Than "a Cancer on the Presidency"
• Washington Examiner:  Congressman: IRS Asked Pro-life Group About 'the Content of Their Prayers'
• Washington Examiner:  IRS Tax Exemption/ObamaCare Exec Got $103,390 in Bonuses; Did Obama OK Them?
• Washington Post op-ed:  An ‘Unthinkable’ IRS Scandal? More Like Unavoidable, by Joseph J. Thorndike (Tax Analysts)
• Washington Post:  At Cincinnati IRS Office, Surprise Over Claims of Partisan Villainy
• Washington Post:  House Panel Launches Inquiries Into IRS Targeting of Conservative Groups
• Washington Post:  IRS Scandal: Peggy Noonan vs. Nate Silver
• Washington Post:  IRS Stalled Conservative Groups, But Gave Speedy Approval to Obama Foundation
• Washington Post:  Lawyer Says IRS Question Was Planted
• Washington Post:  The 10 Most Bizarre Things About the IRS Scandal
• Washington Post:  The IRS’s Unreasonable 501(c)4 Requests
• Washington Times editorial:  Rotten Fish at the IRS
• Weekly Standard:  IRS Deliberately Chose Not to Fess Up to Scandal Before Election

Prior TaxProf Blog coverage:

• IRS Admits to Targeting Conservative Groups in 2012 Election (May 10, 2013)
• WaPo and WSJ Agree: IRS Targeting of Conservatives Is Appalling (May 11, 2013)
• Schmalbeck on the IRS 'Targeting' of Conservative Groups (May 12, 2013)
• The Deepening IRS Scandal (May 13, 2013)
• The IRS Scandal, Day 5 (May 14, 2013)
• Jon Stewart and Vic Fleischer on the IRS Scandal (May 14, 2013)
• Inspector General: Ineffective IRS Management Allowed Agents to Target Conservative Groups (May 14, 2013)
• The IRS Scandal, Day 6 (May 15, 2013)
• Ellen Aprill, The TIGTA Report on the IRS Scandal: Questions About the IRS and About the Report (May 15, 2013)
• Phillip Hackney, The TIGTA Report on the IRS Scandal: Be on the Lookout for False Partisan Witchunts (May 15, 2013)
• The IRS Scandal, Day 7 (May 16, 2013)
• The IRS Scandal, Day 8 (May 17, 2013)

The IRS Scandal, Day 8

• White House Press Release:  President Obama Appoints Daniel Werfel as Acting Commissioner of Internal Revenue
• White House Profile:  Daniel Werfel
• IRS:  Questions and Answers on 501(c) Organizations
• IRS:  Approved Tax-Exempt Applications for Advocacy Organizations through May 9, 2013
• American Enterprise Institute:  What Congress Should Do About IRS Tea Party Bias
• Bloomberg:  IRS Probe Sheds Light on Nonprofit Election-Year Surge
• Bloomberg:  Ousted Acting IRS Head Faces Lawmaker Grilling in Scandal
• CNN:  IRS Scandal May Unleash a Flood of Conservative Donors
• Daily Caller:  Did the IRS Give Mitt Romney’s Tax Returns to Harry Reid?
• Daily Caller:  Schumer, Franken urged IRS to target tea party in 2012
• Dorf on Law:  The IRS Mess Is Already Badly Misunderstood -- And the Distorted Narrative Will Only Get Worse, by Neil H. Buchanan (George Washington)
• The Fiscal Times:  Now We Find Out That the IRS Is Incompetent
• Fox News:  Conservative Hispanic Groups Targeted In IRS Scandal
• Fox News:  IRS Official Who Oversaw Unit Targeting Tea Party Now Heads ObamaCare Office
• National Review:  An Agency After Obama’s Own Heart: Sure, Obama Probably Didn’t Order the IRS to Discriminate. But He Set the Tone 
• National Review:  The IRS and Big Government
• New York Times:  GOP, Energized, Weighs How Far to Take Inquiries
• New York Times:  Obama to Name Budget Official as Acting IRS Chief
• New York Times Opinionator:  Behind the IRS Mess: A Campaign Finance Scandal, by Steven Ratner
• Wall Street Journal editorial:  Nina Olson for IRS Commissioner:  To Atone for Political Abuse, Give the Taxpayer Advocate a Promotion
• Wall Stret Journal op-ed:  This Is No Ordinary Scandal: Political Abuse of the IRS Threatens the Basic Integrity of Our Government, by Peggy Noonan
• Wall Street Journal:  The IRS Scandal Started at the Top: The Bureaucrats at the IRS Did Exactly What the President Said Was the Right and Honorable Thing to Do
• Wall Street Journal:  Republicans Step Up IRS Scrutiny
• Washington Examiner:  The IRS is Deeply Political — And Very Democratic
• Washington Post:  Five Steps to Remedy Wrongs Done by the IRS
• Washington Post:  Obama Appoints Daniel Werfel as Acting Head of IRS

NBC Sports:  Evan Mathis Shows His Disdain for the IRS:

Prior TaxProf Blog coverage:

• IRS Admits to Targeting Conservative Groups in 2012 Election (May 10, 2013)
• WaPo and WSJ Agree: IRS Targeting of Conservatives Is Appalling (May 11, 2013)
• Schmalbeck on the IRS 'Targeting' of Conservative Groups (May 12, 2013)
• The Deepening IRS Scandal (May 13, 2013)
• The IRS Scandal, Day 5 (May 14, 2013)
• Jon Stewart and Vic Fleischer on the IRS Scandal (May 14, 2013)
• Inspector General: Ineffective IRS Management Allowed Agents to Target Conservative Groups (May 14, 2013)
• The IRS Scandal, Day 6 (May 15, 2013)
• Ellen Aprill, The TIGTA Report on the IRS Scandal: Questions About the IRS and About the Report (May 15, 2013)
• Phillip Hackney, The TIGTA Report on the IRS Scandal: Be on the Lookout for False Partisan Witchunts (May 15, 2013)
• The IRS Scandal, Day 7 (May 16, 2013)

The IRS Scandal, Day 7

• The Atlantic:  'Angry' Obama: IRS Chief Is Out, and New Safeguards Are Coming
• Bloomberg:  Congress Focuses on IRS Delay in Disclosing Tea Party Scrutiny
• Bloomberg:  IRS Says Concerns About Some Tea Party Groups Prompted Label
• Boston Globe editorial:  In Targeting Conservative Groups, IRS Violated Core Principles
• Cato Institute:  The IRS Scandal: Hiding In Plain Sight, by Walter Olson
• Columbia Journalism Review:  The Other IRS Scandal: Required Context for a Controversy, by David Cay Johnston
• CNN:  Source: Two 'Rogue' Workers Principally Behind IRS Targeting of Conservatives
• Daily Caller:  Scandal-Plagued IRS Official Will Give Speech, Receive Award at College Commencement
• Forbes:  Suit Alleges IRS Improperly Seized 60 Million Personal Medical Records
• Human Events:  Left-Wing Groups Sailed Past the Politicized IRS
• L.A. Times:  The Real Scandal: IRS Gives Tax Exemptions to Political Partisans
• Legal Ethics Forum:  IRS Scandal: Why Reveal at the ABA Conference? (The Answer Isn't Flattering to the IRS), by John Steele
• National Law Journal:  Scandal Could Change How IRS Regulates Political Groups
• National Review:  Defending the Taxman: Debunking the IRS Excuses and Evasions
• National Review:  Director of IRS Tax-Exempt Determinations Office is Obama Donor
• National Review:  IRS Employees Disproportionately Donate to Obama: Statistics Reveal an Imbalance in a Nominally Nonpartisan Agency 
• National Review:  IRS Source: Cincinnati Told to Lock Down Data
• New York Times:  Acting Chief of IRS Forced Out Over Tea Party Targeting
• New York Times editorial:  Take Politics Away From the IRS
• New York Times op-ed:  The Real IRS Scandal
• New York Times Opinionator:  The Taxman Cometh, by David Brooks & Gail Collins
• Reuters:  US Senator Probing Why IRS Revealed Mistakes at Lawyer Meeting
• The Right Sphere:  Speaking of Shady 501(c)(4) Non-Profits…
• Slate:  It’s About Disclosure, Stupid: The Larger Failing Behind the Terrible IRS Treatment of Tea Party Groups, by Richard L. Hasen (UC-Irvine)
• Wall Street Journal editorial:  Your Next IRS Political Audit:  The Tax Agency Is Getting Vast New Power in Health Care
• Wall Street Journal editorial:  Democrats and the IRS: Chuck Schumer Wanted the Agency to Probe Tax-Exempt Political Groups
• Wall Street Journal op-ed:  The Senate Roots of the IRS Scandal: High-ranking Democrats in 2010 Began Egging the Agency to Investigate Conservative Nonprofits
• Wall Street Journal:  A Brief History of IRS Political Targeting: One Survey Found That 75% of IRS Respondents Felt Entitled to Deceive or Lie to Congress
• Wall Street Journal:  The 'Independent' Revenue Service: President Obama Has a Strange View of IRS Political Accountability
• Wall Street Journal:  Tax Scandal Fells IRS Chief 
• Washington Post:  Acting Director of IRS Resigns Amid Furor Over Targeting of Conservative Groups
• Washington Examiner:  IRS Exec Got $42K in Bonuses in Three Years

IRS, Exempt Organization Field Examination Flowchart:

Hackney: The TIGTA Report on the IRS Scandal: Be on the Lookout for False Partisan Witchunts

Phillip Hackney (LSU), The TIGTA Report on the IRS Scandal: Be on the Lookout for False Partisan Witchunts:

The TIGTA report on the IRS Teaparty scandal pretty much confirmed my expectations which is that the claim that the IRS "targeted" conservative groups to the exclusion of others is false.  This is the most explosive charge that everyone had been expecting.  Additionally, the IRS did not single out conservative groups alone to send ridiculously long and inappropriate questions -- it did it to everyone caught in the net of political advocacy. Interestingly, the report identifies that 96 of 298 cases were related to conservative tea party, patriot or 9/12 groups.  I don't know what that leaves for the allegiances of the other 68%, but it would have been nice to know. If the other greater than 2/3s amount had liberal or democratic allegiances, we have a much different scandal on our hands -- Obama is targeting liberals, why? -- but TIGTA does not provide this information.

The report is well-written and gives some good recommendations, but it acts like a knee surgeon examining an elderly sick patient.  The doctor tells her that her problem is a bad knee and if he gives her a new knee, she will be like new again.   It's all good and well to tell the IRS to beef up its work on political advocacy, but that ignores the real problem, which is that it gets in over 60,000 paper applications a year that it somehow has to both quickly and with accuracy review with too small of a staff. 

The types of applications the IRS faces are changing continuously leaving little ability for the high level standard setting TIGTA calls for. As soon as it develops one set of standards developed organically from watching the applications coming into the office, a new type of organization arises. Meanwhile the IRS EO office is trying to meet the twin aims to be fast and accurate.  They are impossibilities. To be fast, you must eliminate much in the way of higher level review. To be accurate you must involve higher level review. To do higher level review you need more seasoned knowledgeable attorneys that can make these calls. Such money will not be allocated to this office ever. Better recommendations might be to force the application process to become electronic and to use some social science methods to determine applications that are most likely in need of a review, but the office would need a lot more money for that. 

At the end of the day -- yes to inept management, but that does not acknowledge the ridiculous challenge that office faces -- but, No to Intentional partisan conservative hunting on the part of the IRS.  What happened here is simply endemic of this office.Any organization that applies for exemption presenting a type of organization that the office has the time and inclination to try to focus on at the moment will face similar challenges in timing and ridiculously broad inquiries. This is the agents, who are not lawyers but good people trying to do their job, muddling through the best they can getting slow frustrating legal advice from the folks above them like me when I was there. The report notes that the average time for other types of organizations flagged for review was much less than faced by the political advocacy cases -- very simple explanation -- this is an average and probably a lot of the other types of organizations had methods developed for handling such matters -- the IRS was faced with a wave of social welfare organization applications engaged in political advocacy in a way that the office had not really faced or thought through before (social welfare organizations had even recently been referred to as the trash bin of exempt organizations by the IRS). Any time the IRS faces a new issue, it is very slow and very deliberate in the way it works to handle such applications and they tend to be handled from bottom up rather than top down as we witnessed in this case.  This means they will probably get some calls wrong during the early stage of the development of a wave of new organizations, but quickly like bees in a beehive they will make corrections to more properly handle the situation.

Critically, note that all the worst IRS inquiries to the political advocacy organizations that the public has been most concerned about were ultimately overruled when subjected to actual review at a higher level. The TIGTA report for instance demonstrates that the IRS found that the request for lists of donors was an inappropriate request and they devised a way to ensure that these donor lists were not disclosed and in fact destroyed. This is slower than we might have liked, but it is very common for this office because of the challenges it faces in handling its workload. It often works from bottom to top rather than the other way around because of necessity. 

The biggest problem is the IRS's inept handling of the politics of the whole affair, and its bizarre means of communicating its failures in this instance. This led to the IRS losing control of the message, even to Jon Stewart and The Daily Show, with the public thinking the worst of the IRS. I remain concerned regarding the apparently deficient disclosure to Congress when high level officials were asked apparently direct questions that I would have thought would have led to disclosure of the review of the Tea Party organizations. There may be a good explanation for those failures and hopefully we will hear those when Steve Miller testifies soon.

Nevertheless, other than the disclosure problems, this TIGTA review gives an accurate picture of an organization that I came to know and love when I worked there.  Good people trying to do good work, but set for failure because provided poor clay in the Internal Revenue Code provisions on exempt organizations and too little staff and money to carry out the twin aims of accuracy and speed in molding that poor clay into a consistent good product.

GAO Finds 60 Deficiencies in IRS's Internal Controls

The Government Accountability Office today released Improvements Are Needed to Enhance the Internal Revenue Service's Internal Controls (GAO-13-420R):

During its audit of the IRS fiscal year 2012 financial statements, GAO identified one new internal control deficiency that contributed to IRS's continuing material weakness in internal control over unpaid tax assessments as of September 30, 2012. Specifically, IRS's controls over its process for estimating the balances of federal taxes receivable and other unpaid tax assessments were not effectively implemented to ensure the proper accounting classification and dollar amounts. In addition, GAO identified the following six less significant, new internal control deficiencies as of September 30, 2012. ...

Further, GAO's work showed that as of September 30, 2012, IRS had completed corrective action on 23 of the 69 recommendations from GAO's prior financial audits and other financial management-related work that remained open at the beginning of the fiscal year 2012 financial audit. As a result, IRS currently has 60 recommendations that need to be addressed, which consist of the previous 46 open recommendations as well as 14 new recommendations GAO is making in this report.

WSJ: IRS Reviews Private Equity Management Fee Waivers

Wall Street Journal:  IRS Eyes a Private-Equity Tax Move, by Mark Maremont:

The IRS is examining the propriety of a tax practice used in some parts of the private-equity industry, in which firms convert management fees into investments that receive more favorable tax treatment, a senior IRS official said at a recent legal conference.

The practice, often called a management-fee waiver or fee-waiver conversion, has been used for years by partners at some of the nation's largest private-equity firms to reduce their taxes, and can involve significant sums. ...

In the main strategy in question, private-equity firms or firm partners voluntarily waive annual or quarterly management fees due to them from investors. Instead, the firms often redirect that fee money to satisfy their own obligations to invest in the funds they manage. That change can turn management fees, currently taxed as ordinary income at federal rates of up to 39.6%, into investments that enjoy capital-gains treatment at lower rates, now starting at 20% for upper-income federal taxpayers....

Proponents have said the strategy is legal, that executives take on risk by redirecting the money into investments and thus should be taxed at lower rates. Some academics have called it aggressive and potentially subject to IRS challenge.

Partly at issue is whether the strategy fits within a 1993 IRS ruling [Rev. Proc. 93-27, 1993-2 CB 343], and whether it potentially triggers a separate law about partnership transactions that would require the income to be taxed at ordinary rates.

Some lawyers say private-equity firms have employed different versions of the tax strategy, along a spectrum ranging from conservative to more aggressive from a tax standpoint.

Schmalbeck on the IRS 'Targeting' of Conservative Groups

Following up on my prior posts:

• IRS Admits to Targeting Conservative Groups in 2012 Election (May 10, 2013)
• WaPo and WSJ Agree: IRS Targeting of Conservatives Is Appalling (May 11, 2013)

Richard Schmalbeck (Duke) agreed to allow me to share his perspective posted on the TaxProf Email Discussion Group:

I was at the Exempt Organizations Committee meeting of the ABA Tax Section meeting when Lois Lerner, the director of the division that handles exempt organizations matters, dropped the bombshell that is in the papers today, and generating a lot of media outrage, especially but not exclusively on Fox News. I think her explanation in person was probably better than the statement that the IRS released, at least in terms of explaining why some exemption applications actually require more scrutiny than others.

The IRS position on 501(c)(4) organizations ("social welfare organizations")is that, while they can engage in campaign activities, they cannot do so as their primary activity—which they understand as more than 50% of the organization's activities. Many organizations that seek this status probably should be section 527 political organizations rather than social welfare organizations. So when the service center in Cincinnati, which handles exemption applications, was inundated with unusually large numbers of (c)(4) applications, they tried to find ways to triage them, so that the traditional social welfare organizations would not have their processing held up, but organizations that might be close to the 50% campaign activity zone would get the appropriate level of scrutiny. In developing ways to identify the applications requiring attention, one of the tests that somebody decided would work is whether the organization had "tea party" or "patriot" in its name. The IRS did also look at other organizations with potential for abuse of the social welfare organization status, but apparently did not come up with any shorthand ways of identifying any such organizations that did not have "tea party" or "patriot" in their names.

This was obviously a bad idea for a number of reasons, including its political asymmetry. But a) it didn't come from the top—Lois is herself a career employee, and it was a decision made somewhere below her level; and b) it did not involve scrutiny that was inappropriate under the circumstances. The content of some of the scrutiny may have been inappropriate, however, in seeking names of donors, which is not ordinarily done. (Even here, I can imagine some basis for thinking this was relevant to the inquiry: if all an organization's funds were coming from a party, or other 527 organizations, it would be a matter of some concern, and raise a somewhat higher suspicion that the organization was being used to finance campaign activities primarily. And while public disclosure of donors is not required, there is no absolute bar on the IRS seeking information about donors. They do it routinely in their efforts to determine private foundation status and compliance, since major donors are disqualified persons for purposes of the private foundation excise taxes. I should emphasize that Lois did not offer this explanation however—it is just my speculation on why IRS staff might have asked that question.)

I think the problem is that if you hear that tea party organizations were "targeted" for special scrutiny, it is hard to imagine an explanation that doesn't depend on partisan bias. But there is such an explanation: the need to draw the line between (c)(4) and 527 organizations. I'm not saying that this was the right way to go about this, and neither is Lois or anyone else in the IRS. But at the same time, it isn't the smoking gun that some in the media seem to think it is. It is nothing like Richard Nixon asking the IRS to audit his political enemies, though it is being compared to that.

• Legal Ethics Forum, Legal Ethics Angle in That IRS Auditing Scandal?, by John Steele
• New York Times op-ed, The Taxman vs. the Tea Party, by Ross Douthat
• San Diego Union-Tribune editorial, A Shameful Abuse of Power by the IRS

WaPo and WSJ Agree: IRS Targeting of Conservatives Is Appalling

Following up on yesterday's post, IRS Admits to Targeting Conservative Groups in 2012 Election:

Washington Post editorial, Playing Politics With Tax Records:

A bedrock principle of U.S. democracy is that the coercive powers of government are never used for partisan purpose. The law is blind to political viewpoint, and so are its enforcers, most especially the FBI and the IRS. Any violation of this principle threatens the trust and the voluntary cooperation of citizens upon which this democracy depends.

So it was appalling to learn Friday that the IRS had improperly targeted conservative groups for scrutiny. It was almost as disturbing that President Obama and Treasury Secretary Jack Lew have not personally apologized to the American people and promised a full investigation. 

“Mistakes were made,” the agency said in a statement. IRS official Lois Lerner explained that staffers used a “shortcut” to sort through a large number of applications from groups seeking tax-exempt status, highlighting organizations with “tea party” or “patriot” in their names. The IRS insisted emphatically that partisanship had nothing to do with it. However, it seems that groups with “progressive” in their titles did not receive the same scrutiny.If it was not partisanship, was it incompetence? Stupidity, on a breathtaking scale? At this point, the IRS has lost any standing to determine and report on what exactly happened. Certainly Congress will investigate, as House Majority Leader Eric Cantor (R-Va.) promised. Mr. Obama also should guarantee an unimpeachably independent inquiry. 

Wall Street Journal editorial, The IRS Targets Conservatives:

Just because you're paranoid doesn't mean the IRS isn't out to get you. We only wish that were a joke. On Friday, an IRS official disclosed for the first time, and by way of apologizing, that the agency that wields the taxing power of the federal government had targeted conservative groups for special scrutiny during the 2012 election season. Apology or not, that can't be the end of the matter.

The stunning admission didn't emerge in an official statement by a senior official at the Treasury Department, which supervises the IRS. Instead, IRS Director of Exempt Organizations Lois Lerner disclosed it on Friday in response to a question from the audience at a meeting of American Bar Association tax lawyers in Washington, D.C.

Ms. Lerner acknowledged that the agency had flagged groups with the words "tea party" or "patriot" to have their tax returns inspected, presumably with an eye on the legality of their tax exemption. Ms. Lerner called this "inappropriate," which it certainly was, and she said it wasn't done "out of any political bias," which is hard to believe. If there was no political bias, why were only conservative groups targeted? White House spokesman Jay Carney also called the IRS actions "inappropriate" on Friday, which makes that the word of the day.

Ms. Lerner added the tax inspections were carried out entirely by low-level workers in Cincinnati without any direction from Washington. Forgive us if we also don't take that claim as gospel.

Even if the idea did arise as some kind of spontaneous Cincinnati political combustion, where could they possibly have come up with the idea that targeting the tea party might be a good career move? That certainly was the uber political message coming out of the White House, even if it wasn't a directive from the top of the IRS. Another question is who stopped the "inappropriate" requests once they were discovered. Was anyone punished? And how far up the chain of command did knowledge go? ...

Republicans were up in arms Friday about the IRS disclosure, and rightly so. We assume they will use their oversight power in the House to find out what happened, and whether these Cincinnati kids were really operating on their own.

Other than the power to prosecute, the taxing authority is the most awesome power the government has. It can ruin people and companies. When wielded for political purposes, it is a violation of the basic contract the American people have with their government. The abuse admitted by Ms. Lerner can't be dismissed in a casual apology on a casual Friday as no big deal. It's a very big and bad deal.

• Christian Science Monitor, IRS Apologizes for Singling Out Conservative Groups: How Did It Happen?
• The Daily Beast, IRS Singled Out Conservative Groups for Extra Scrutiny, by Megan McArdle
• The Hill, Camp Vows Hearing on IRS Treatment of Tea Party Groups
• Hot Air, 10 Crazy Things the IRS Asked Tea Party Groups
• Politico, IRS Under Siege With No Friends
• Power Line, Obama’s Abuse of the IRS–This Isn’t the First Time
• Wall Street Journal Law Blog, Reaction to the IRS Apology 
• Washington Examiner, IRS Won't Say Whether it Will Discipline Employees Over Targeting of Tea Party Groups

Update:   From the Associated Press:

Senior Internal Revenue Service officials knew agents were targeting tea party groups as early as 2011, according to a draft of an inspector general's report obtained by The Associated Press that seemingly contradicts public statements by the IRS commissioner. ...

Among the other revelations, on Aug. 4, 2011, staffers in the IRS’ Rulings and Agreements office “held a meeting with chief counsel so that everyone would have the latest information on the issue.” 

• The Hill, Report: Top IRS Officials Knew of Tea Party Targeting Two Years Ago
• L.A. Times, IRS Official Knew in 2011 That Tea Party Was Targeted
• Politico, IRS Officials Knew of Tea Party Targeting
• Volokh Conspiracy, IRS Officials Knew of Targeting in 2011
• Washington Post, Report: Top IRS Officials Knew in 2011 That Conservative Groups Were Targeted

IRS Admits to Targeting Conservative Groups in 2012 Election

After months of denying that the IRS has been targeting tea party groups for special scrutiny, Lois Lerner, Director of the IRS's Exempt Organizations Division, admitted that the IRS had been giving additional scrutiny to applications for tax-exempt status from goups with the "Tea Party" or "patriot" in their title. She denied there was any political motivation and blamed the practice on a low-level employee in Cincinnati.

Update:  The IRS has released this statement.

• ABC News, Tea Party Rejects IRS Apology
• Daily Beast:  The IRS Takes Aim at the Tea Party
• Election Law Blog, “IRS Apologizes For Targeting Conservative Groups In 2012 Election”
• Forbes, IRS to Tea Party: Sorry We Targeted You and Your Tax Status 
• National Review, 'Mistakes Were Made'
• New York Times, IRS Apologizes to Conservative Groups Over Application Audits
• Tax Update Blog, Look at a Celebrity Return? You’re Fired! Harass a Tea Party Outfit? Carry On.
• Volokh Conspiracy, IRS Admits Targeting “Tea Party” Groups
• Wall Street Journal, IRS Apologizes for Scrutiny of Conservative Groups 
• Wall Street Journal, The New Nixon:  This Time, the Press Cheered as the IRS Investigated the President's Opponents.
• Washington Post, IRS Admits Targeting Conservatives for Tax Scrutiny in 2012 Election
• Washington Times, Congress Vows to Investigate IRS Over Conservative Audits

Prior TaxProf Blog coverage:

• Is President Obama Ineligible to Work for the IRS?
• Barack Milhous Obama: Presidents Should Not Joke About Using the IRS as Political Enforcer

IRS Releases FY2012 Criminal Investigation Report

IR-2013-50, IRS Criminal Investigation Issues Fiscal 2012 Report:

IRS Criminal Investigation (CI) today released its Annual Report for fiscal 2012, highlighting strong gains in enforcement actions and penalties imposed on convicted tax criminals.

The 28-page report summarizes a wide variety of IRS CI activity on a range of tax related issues during the year ending Sept. 30, 2012. CI investigates potential criminal violations of the Internal Revenue Code and related financial crimes in a manner to foster confidence in the tax system and compliance with the law.

"The key to our successes is perseverance and dedication to working complex financial investigations aimed at stopping tax fraud, identity theft, offshore tax evasion, public corruption, money laundering and other financial crimes," said Richard Weber, Chief of Criminal Investigation. ...

Investigations initiated and prosecution recommendations were both up nearly 9 percent in fiscal 2012 compared to the prior year. Filings of indictments and other charging documents rose 13 percent. Meanwhile, convictions and those sentenced both gained roughly 12 percent from the prior year.

Criminal investigation initiations totaled 5,125 cases in fiscal 2012 while investigations completed were 4,937 – up 5 percent from fiscal 2011. Convictions totaled 2,634 in fiscal 2012 while the conviction rate edged up slightly to 93 percent.

IRS, Australia & UK Join Forces to Combat Offshore Tax Evasion

IR-2013-48 (May 9, 2013):  IRS, Australia and United Kingdom Engaged in Cooperative Effort to Combat Offshore Tax Evasion:

The tax administrations from the United States, Australia and the United Kingdom announced today a plan to share tax information involving a multitude of trusts and companies holding assets on behalf of residents in jurisdictions throughout the world.

The three nations have each acquired a substantial amount of data revealing extensive use of such entities organized in a number of jurisdictions including Singapore, the British Virgin Islands, Cayman Islands and the Cook Islands. The data contains both the identities of the individual owners of these entities, as well as the advisors who assisted in establishing the entity structure.

The IRS, Australian Tax Office and HM Revenue & Customs have been working together to analyze this data and have uncovered information that may be relevant to tax administrations of other jurisdictions. Thus, they have developed a plan for sharing the data, as well as their preliminary analysis, if requested by those other tax administrations.

• Bloomberg, IRS Opens Tax Cases Based on Trove of Offshore Data

Small Business Owners Sue IRS Over ObamaCare

Blog of the Legal Times:  Small Business Owners Sue IRS Over Obamacare:

Objecting to what they term an "Obamacare power grab," a group of small business owners and individuals in six states filed suit today against the IRS over a rule that expands health insurance subsidies.

The plaintiffs say the IRS regulations "actually serve to financially injure and restrict [their] economic choices" and are arbitrary and capricious, according to the complaint filed in U.S. District Court for the District of Columbia by Jones Day partner Michael Carvin, who co-argued the U.S. Supreme Court cases challenging the Affordable Care Act in March 2012.

The suit against the IRS focuses on health care exchanges - state-level clearinghouses that are supposed to make it easier for people to buy insurance. The federal government doesn’t have the power to force states to set up such exchanges, but the law provides incentives for them to do so.

• The Hill, Lawsuit Accuses IRS of 'Flagrantly Illegal' Actions in Rollout of ObamaCare 
• Human Events, Business Owners Sue IRS Over ObamaCare Employer Mandate
• Reuters, Healthcare Law Opponents Sue Obama Officials Over IRS Rules
• Wall Street Journal, Obamacare Gets New Court Challenge

IRS Grabs Man's Tax Refund to Recoup Social Security's Alleged $895 Overpayment to Mother 42 Years Ago

First Coast News:  Social Security Comes After Man for $895 Overpayment They Made to His Mom:

Imagine if your parent received an over-payment from the government but decades later, the government took the money out of your tax return. Gilbert Stokes, 60, of Jacksonville, said it happened to him.

"I'm angry," Stokes said Wednesday morning. Stokes felt the same way when he received a letter from the Social Security Administration in January. "[The letter] said [SSA] was going to withhold my taxes unless I contacted about this social security over-payment," Stokes explained.

Forty-two years ago in 1971, Stokes' mother Ruby Lee received an over-payment of $895 while he was in the Navy. "My first impression was someone was trying to punk me," he said. Stokes' mother died five years ago.

GAO: IRS Collected $5.5 Billion in 2007-2010 From Offshore Bank Cheats, But May Be Missing Billions More

The Government Accountability Office yesterday released Offshore Tax Evasion: IRS Has Collected Billions of Dollars, but May be Missing Continued Evasion (GAO-13-318):

Tax evasion by individuals with unreported offshore financial accounts was estimated by one IRS commissioner to be several tens of billions of dollars, but no precise figure exists. IRS has operated four offshore programs since 2003 that offered incentives for taxpayers to disclose their offshore accounts and pay delinquent taxes, interest, and penalties. GAO was asked to review IRS’s second offshore program, the 2009 OVDP. This report (1) describes the nature of the noncompliance of 2009 OVDP participants, (2) determines the extent IRS used the 2009 OVDP to prevent noncompliance, and (3) assesses IRS’s efforts to detect taxpayers trying to circumvent taxes, interests, and penalties that would otherwise be owed.

IRS has detected some taxpayers with previously undisclosed offshore accounts attempting to circumvent paying the taxes, interest, and penalties that would otherwise be owed, but based on GAO reviews of IRS data, IRS may be missing attempts by other taxpayers attempting to do so. GAO analyzed amended returns filed for tax year 2003 through tax year 2008, matched them to other information available to IRS about taxpayers' possible offshore activities, and found many more potential quiet disclosures than IRS detected. Moreover, IRS has not researched whether sharp increases in taxpayers reporting offshore accounts for the first time is due to efforts to circumvent monies owed, thereby missing opportunities to help ensure compliance. From tax year 2007 through tax year 2010, IRS estimates that the number of taxpayers reporting foreign accounts nearly doubled to 516,000. Taxpayer attempts to circumvent taxes, interest, and penalties by not participating in an offshore program, but instead simply amending past returns or reporting on current returns previously unreported offshore accounts, result in lost revenues and undermine the programs' effectiveness.

• Accounting Today, IRS Offshore Disclosure Programs Net $5.5 Billion
• Huffington Post, 39,000 Tax Cheats Come Forward Under New IRS Programs
• Reuters, IRS May be Missing Offshore Tax Evasion: Government Watchdog
• Wall Street Journal, Grading the IRS’s Offshore-Amnesty Programs

(Hat Tip; Bruce Bartlett, Francine Lipman.)

IRS Releases College and University Tax Compliance Report

IR-2013-44:  IRS Releases Final Report on Tax-Exempt Colleges and Universities Compliance Project;

The IRS today released its final report summarizing audit results from the IRS’ colleges and universities study, which began in 2008. This final report describes the agency’s multi-year project on a major segment of tax-exempt organizations.   

“The audits identified some significant compliance issues at the colleges and universities examined,” said Lois Lerner, Director, Exempt Organizations division. “Because these issues may well be present elsewhere across the tax-exempt sector, all exempt organizations need to be aware of the importance of accurately reporting unrelated business income and providing appropriate executive compensation.”

The attached final report focuses on two primary areas within the examinations: reporting of unrelated business taxable income, and compensation, including, employment tax and retirement plan issues. ...

Examinations have resulted in:

• Increases to UBTI for 90% of colleges and universities examined totaling about $90 million;
• Over 180 changes to the amounts of UBTI reported by colleges and universities on Form 990-T; and
• Disallowance of more than $170 million in losses and Net Operating Losses (NOLs, i.e., losses reported in one year that are used to offset profits in other years), which could amount to more than $60 million in assessed taxes. ...

Overall, the average and median base salary and total compensation for the top management official of the colleges and universities examined, both public and private, were as follows:

• Average base salary: $448,981; median base salary, $363,943
• Average total compensation: $561,135; median total compensation, $458,152.

TIGTA: IRS Fails to Comply With Mandated Reduction in Improper Payments -- 25% EITC Fraud Costs $14 Billion/Year

The Treasury Inspector General for Tax Administration today released The Internal Revenue Service Was Not in Compliance With All Requirements of the Improper Payments Elimination and Recovery Act for Fiscal Year 2012 (2013-40-024):

The Improper Payments Elimination and Recovery Act (IPERA) of 2010 increased agency accountability for reducing improper payments in Federal programs. The only program the IRS has identified for improper payment reporting is the Earned Income Tax Credit (EITC) Program. The IRS estimates that 21 to 25 percent of EITC payments were issued improperly in Fiscal Year 2012. The dollar value of these improper payments was estimated to be between $11.6 billion and $13.6 billion.

TIGTA’s analysis of the information the IRS provided to the Department of the Treasury showed that the IRS is not in compliance with all IPERA requirements. Specifically, the IRS has not established annual EITC improper payment reduction targets and has not reported an improper payment rate of less than 10 percent. This is the second consecutive year that the IRS is not in compliance with the IPERA. Although the IRS has implemented a number of programs over the years to address EITC improper payments, the IRS faces significant challenges to becoming compliant with the IPERA. Specifically, the process the Department of the Treasury uses to assess the risk of improper payments within its bureaus does not effectively assess the risk of improper payments in tax administration. In addition, the ever-changing population of EITC claimants makes it difficult for the IRS to gain lasting improvements in EITC compliance through outreach, education, and enforcement.

House Questions IRS Decision to Send Employees to Union Conference in Vegas in Wake of Furloughs

Following up on Friday's post, IRS to Close to Public for Five Days Due to Employee Furloughs:  Charles W. Boustany, Jr., Chairman of the Subcommittee on Oversight of the House Ways & Means Committee, sent a letter to Acting IRS Commissioner Steve Miller seeking information about the decision to send nine IRS union employees to National Treasury Employees Union conferences in Las Vegas, New Orleans, and other cities.

• Washington Examiner, Furloughs? IRS Sends Staff to Vegas for Union Training

IRS to Close to Public for Five Days Due To Employee Furloughs

The IRS announced today that it will close to the public for five days (May 24, June 14, July 5, July 22, and August 30) because of employee furloughs:

All public-facing operations will be closed on these dates, including our toll-free operations and Taxpayer Assistance Centers. Some mission-essential IT and security personnel, who maintain systems and building safety, may need to work on these furlough days, however they will be taking furlough days on alternative dates within those pay periods. Everyone is covered by this furlough, and that means everyone from the Acting Commissioner and executives to managers and employees.

• Bloomberg
• Wall Street Journal
• Washington Post
  

24 IRS Employees Indicted for Theft of Government Benefits

U.S. Attorney for the Western District of Tennessee, Press Release:

24 current and former employees of the Internal Revenue Service have been charged for crimes relating to fraudulently obtaining more than $250,000 in government benefits.

Thirteen of the current and former IRS employees have been charged federally with making false statements to obtain unemployment insurance payments, food stamps, welfare, and housing vouchers. All thirteen, individually charged in separate indictments, are alleged to have falsely stated that they were unemployed while applying for or recertifying those government benefits. ... Eleven other former and current IRS employees were charged by the District Attorney General’s Office with theft of property over $1,000, a class D felony.

ACLU: IRS Says It Can Read Taxpayer Email Without a Warrant

ACLU, IRS New Documents Suggest IRS Reads Emails Without a Warrant:

Everyone knows the IRS is our nation’s tax collector, but it is also a law enforcement organization tasked with investigating criminal violations of the tax laws. New documents released to the ACLU under the Freedom of Information Act reveal that the IRS Criminal Tax Division has long taken the position that the IRS can read your emails without a warrant—a practice that one appeals court has said violates the Fourth Amendment (and we think most Americans would agree).

Last year, the ACLU sent a FOIA request to the IRS seeking records regarding whether it gets a warrant before reading people’s email, text messages and other private electronic communications. The IRS has now responded by sending us 247 pages of records describing the policies and practices of its criminal investigative arm when seeking the contents of emails and other electronic communications.

So does the IRS always get a warrant? Unfortunately, while the documents we have obtained do not answer this question point blank, they suggest otherwise.... Let’s hope you never end up on the wrong end of an IRS criminal tax investigation. But if you do, you should be able to trust that the IRS will obey the Fourth Amendment when it seeks the contents of your private emails. Until now, that hasn’t been the case.

• Accounting Today, IRS Reads Taxpayer Emails Without a Warrant
• CNet, IRS Claims it Can Read Your E-mail Without a Warrant
• The Hill, IRS: We Can Read Emails Without Warrant
• Human Events, IRS: We Can Read Your Emails Without a Warrant
• Info World, What Could be Worse Than the IRS's Grubby Hands? Its Spying Eyes
• New York Daily News, ACLU Accuses the IRS of Reading Americans’ Private Email Without a Search Warrant
• Slate, The IRS Doesn’t Think “Reasonable Expectation of Privacy” Applies to Your Emails
• Washington Times, IRS to Taxpayers: We Don’t Need a Warrant for Email Snooping, GPS Tracking

(Hat Tip: David J. Herzig.)

Is the IRS Stalking You on Facebook, Twitter?

RT, IRS to Monitor Facebook, Twitter for Tax Cheats:

Is the IRS about to get too close for comfort? New reports brought to light by one privacy and data security expert suggest that this tax filing season the Internal Revenue Service may be monitoring social media for any clues of tax cheats.

According to Kristen Mathews, a partner attorney at law firm Proskauer Rose LLP who specializes in privacy and data security, there are reports that the IRS will be checking into individual Facebook and Twitter accounts for improprieties.

Though the agency says that it will only conduct such monitoring if a tax form raises a red flag, it is somewhat unclear to what extent it will be capable of delving into social media accounts.

• Fox Business, Is the IRS Stalking You on Social Media?
• The Hill, IRS: We Can Read Emails Without Warrant
• Social News Daily, IRS Social Media Audits? Feds Aren’t Stalking You On Facebook
• U.S. News & World Report, IRS Tracks Your Digital Footprint

Low Income Taxpayer Clinic Program Report

IR-2013-39 (Apr. 8, 2013), Low Income Taxpayer Clinic Program Reports on Activities:

The IRS’s Low Income Taxpayer Clinic (LITC) Program Office has issued its first report showing how LITCs provide pro bono legal services to help thousands of low income taxpayers nationwide resolve disputes with the IRS and learn about their taxpayer rights and responsibilities.

“Although the LITC Program has been operating and helping taxpayers since 1999, this is the first time we have compiled a report describing the program’s activities and accomplishments. We are proud to provide this synopsis and to demonstrate how the pro bono representation, education, and advocacy efforts of clinics assist low income taxpayers,” said Nina E. Olson, National Taxpayer Advocate.

“During the first half of 2012, LITCs helped taxpayers secure more than $3.2 million in tax refunds and to eliminate nearly $16.5 million in tax liabilities, penalties and interest,” said William P. Nelson, LITC Program Director.

The LITCs provide free or low-cost assistance to low income taxpayers who have a tax controversy with the IRS, such as an audit or collection matter, and conduct outreach and education to taxpayers who speak English as a second language (ESL). The report provides an overview and history of the LITC Program, discusses the type of work the LITCs perform, and explains how their work helps ensure the fairness and integrity of the tax system.

Although LITCs receive partial funding from the IRS, LITCs, their employees, and their volunteers operate independently from the IRS. The grant program is administered by the Office of the Taxpayer Advocate at the IRS, led by the National Taxpayer Advocate. The program awards matching grants of up to $100,000 per year to qualifying organizations to develop, expand, or maintain a low income taxpayer clinic.

Johnston: The Tax Police Budget Shrinks

David Cay Johnston (Syracuse),  The Tax Police Budget Shrinks, 139 Tax Notes 211 (Apr. 8, 2013):

With the cuts under the budget sequestration, the IRS budget is down sharply from 2002 and is much too small to ensure the revenue collection necessary to sustain our democracy. 

IRS Budget Change Per Capita (in 2012 dollars)

All Tax Analysts content is available through the LexisNexis® services.

IRS Releases 'Dirty Dozen' Tax Scams

The IRS today released (IR-2013-33) its 2013 “dirty dozen” list of tax scams:

1. Identity Theft
2. Phishing
3. Return Preparer Fraud
4. Hiding Income Offshore
5. “Free Money” from the IRS & Tax Scams Involving Social Security
6. Impersonation of Charitable Organizations
7. False/Inflated Income and Expenses
8. False Form 1099 Refund Claims
9. Frivolous Arguments
10. Falsely Claiming Zero Wages
11. Disguised Corporate Ownership
12. Misuse of Trusts

2013 Tax Filing Season Is Off to a Rough Start

IRS, Filing Season Statistics for Week Ending March 15, 2013:

2013 FILING SEASON STATISTICS
Cumulative statistics comparing 3/16/12 and 3/15/13
Individual Income Tax Returns:	2012		2013		% Change
Total Receipts	78,348,000		73,004,000		-6.8
Total Processed	75,284,000		69,153,000		-8.1
E-filing Receipts:
TOTAL	69,675,000		66,150,000		-5.1
Tax Professionals	42,111,000		38,694,000		-8.1
Self-prepared	27,564,000		27,456,000		-0.4
Web Usage:
Visits to IRS.gov	167,038,289		202,327,795		21.1
Total Refunds:
Number	65,073,000		60,243,000		-7.4
Amount	$188.616	Billion	$172.494	Billion	-8.5
Average refund	$2,899		$2,863		-1.2
Direct Deposit Refunds:
Number	55,557,000		52,414,000		-5.7
Amount	$169.751	Billion	$157.786	Billion	-7.0
Average refund	$3,055		$3,010		-1.5

2012 IRS Data Book

The IRS yesterday released the 2012 IRS Data Book, which contains a wealth of statistical information for the IRS's Oct. 1, 2011 - Sept. 30, 2012 fiscal year.  Here are the statistical tables:

Returns Filed, Taxes Collected, and Refunds Issued

• Table 1: Collections and Refunds, by Type of Tax
• Table 2: Number of Returns Filed, by Type of Return
• Table 3: Number of Returns Filed, by Type of Return and State
• Table 4: Number of Returns Filed Electronically, by Type of Return and State
• Table 5: Gross Collections, by Type of Tax and State
• Table 6: Gross Collections, by Type of Tax
• Table 7: Number of Refunds Issued, by State and Fiscal Year
• Table 8: Amount of Refunds Issued, Including Interest, by Type of Refund and State

Enforcement: Examinations

• Table 9a: Examination Coverage: Recommended and Average Recommended Additional Tax After Examination, by Type and Size of Return
• Table 9b: Examination Coverage: Individual Income Tax Returns Examined, by Size of Adjusted Gross Income
• Table 10: Examination Coverage: Returns Examined with Unagreed Recommended Additional Tax After Examination, by Type and Size of Return
• Table 11: Examination Coverage: Returns Examined Involving Protection of Revenue Base, by Type and Size of Return
• Table 12: Examination Coverage: Returns Examined Resulting in Refunds, by Type and Size of Returns
• Table 13: Returns of Tax-Exempt Organizations, Employee Retirement Plans, Government Entities, and Tax-Exempt Bonds Examined, by Type of Return

Enforcement: Information Reporting and Verification

• Table 14: Information Reporting Program
• Table 15: Math Errors on Individual Income Tax Returns, by Type of Error

Enforcement: Collections, Penalties, and Criminal Investigation

• Table 16: Delinquent Collection Activities
• Table 17: Civil Penalties Assessed and Abated, by Type of Tax and Type of Penalty
• Table 18: Criminal Investigation Program, by Status or Disposition

Taxpayer Assistance

• Table 19: Selected Taxpayer Assistance and Education Programs, by Type of Assistance or Program
• Table 20: Taxpayer Advocate Service: Postfiling Taxpayer Assistance Program, by Type of Issue and Relief
• Table 21: Appeals Workload, by Type of Case

Tax Exempt Activities

• Table 22: Tax-Exempt Guidance and Other Regulatory Activities
• Table 23: Determination Letters Issued on Employee Retirement Plans, by Type and Disposition of Plan
• Table 24: Closures of Applications for Tax-Exempt Status, by Organization Type and Internal Revenue Code Section
• Table 25: Tax-Exempt Organizations and Nonexempt Charitable Trusts

Chief Counsel

• Table 26: Chief Counsel Workload: All Cases, by Office and Type of Case or Activity
• Table 27: Chief Counsel Workload: Tax Litigation Cases, by Type of Case

IRS Budget & Workforce

• Table 28: Costs Incurred by Budget Activity
• Table 29: Collections, Costs, Personnel, and U.S. Population
• Table 30: Personnel Summary, by Employment Status, Budget Activity, and Selected Type of Personnel
• Table 31: Internal Revenue Service Labor Force, Compared to National Totals for Civilian and Federal Labor Forces, by Gender, Race/Ethnicity, and Disability

First-Time Homebuyer Credit

• Table A: First-Time Homebuyer Credit, by State

Press and blogosphere coverage:

• Bloomberg, IRS Audits of Individual Taxpayers Declined 5.3% in 2012

IRS Releases Gilligan's Island Parody Training Video

Following up on Saturday's post, IRS Admits Spending $60k on Star Trek Parody Training Video Was a Mistake:  the IRS has now released its Gilligan's Island parody training video. From Accounting Today:

The Gilligan’s Island video provided filing season training for 1,900 employees in the IRS’s Taxpayer Assistance Centers in 400 locations.”This example of video training alone saved the IRS about $1.5 million each year compared to the costs of training the employees in person,” said the IRS.

“This approach reflects a newer IRS model of using video to dramatically save on training and travel costs,” the IRS explained. “Using video provides a more cost-efficient way of doing business than face-to-face meetings.”

The 2011 Gilligan’s Island segment is the introductory portion of a 12-hour video training series on a variety of  tax law and filing season topics, including remittance procedures; physical and data security in the  taxpayer assistance center; assisting taxpayers with federal tax deposits; ITIN/ATIN and PTIN Inquiries; interactive tax law assistant; quality defects; dependents; energy and education credits; installment agreements; identity theft; adjustments; examination issues; individual retirement accounts; conducting payment processing reviews; analyzing business objects reports; resource tools; and other topics.‬ The Gilligan’s Island themed opening, dubbed "Field Assistance Island," was used to engage employees in the issues to be discussed over the 12 hour training.

(Hat Tip: Jon Forman.)

Update:  New York Times:  IRS Videos Come Under Fire

IRS Admits Spending $60k on Star Trek Parody Training Video Was a Mistake

• IRS, Letter to Chair, Committee on Oversight, House Ways & Means Committee
• Accounting Web, IRS Goes Where No Agency Has Gone Before
• CBS News, Taxpayer-Money Finances IRS "Star Trek" Video
• Forbes, Congress Probes IRS Tax Dollars Spent Making Star Trek Video
• Forbes, IRS Employees' Star Trek Parody Is As Wonderfully Awful As It Sounds
• New York Times, IRS Viedos Come Under Fire
• Washington Examiner, IRS Calls Their 'Star Trek' and 'Gilligan's Island' Training Videos a Mistake
• Washington Post, Highly Illogical: IRS Training Video That Parodies ‘Star Trek’ Apparently Lacks Training Value

(Hat Tip: Rob Anderson.)

IRS Has Nearly $1 Billion in Unclaimed Refunds That Expire April 15

IR-2013-29, IRS Has $917 Million for People Who Have Not Filed a 2009 Income Tax Return:

Refunds totaling just over $917 million may be waiting for an estimated 984,400 taxpayers who did not file a federal income tax return for 2009, the IRS announced today. However, to collect the money, a return for 2009 must be filed with the IRS no later than Monday, April 15, 2013.

The IRS estimates that half the potential refunds for 2009 are more than $500.

Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury.

For 2009 returns, the window closes on April 15, 2013. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.

IRS: California Fire Prevention Fees Are Not Deductible Property Taxes Under § 164

Office of Chief Counsel, IRS Memorandum 2013-10-029 (Jan. 14, 2013) (released Mar. 8, 2013):

Issue:  May California residents deduct the Fire Prevention Fee they may pay on their federal income tax returns as a real property tax deduction under section 164 of the Internal Revenue Code and § 1.164-4 of the Income Tax Regulations?

Conclusion:  California residents may not deduct the Fire Prevention Fee as a real property tax deduction because (i) the fee is not a tax under California or federal law (ii) the fee is not levied at a like rate, (iii) the fee is not imposed throughout the taxing authority's jurisdiction, and (iv) the fee is assessed only against specific property to provide a local benefit

312,000 Federal Workers Owe $3.5 Billion in Back Taxes, Up 11.5% From Prior Year

311,566 federal workers and retirees owed more than $3.5 billion in back income taxes in 2011 (up from $3.4 billion in 2010, $3.3 billion in 2009, $3.0 billion in 2008, and $2.7 billion in 2007).

• Accounting Today, Tax-Delinquent Federal Employees and Retirees Increased 11.5% in 2011
• Bloomberg, Number of Tax-Delinquent Government Workers Up 11.5%
• Fox News, Federal Workers Owe $3.5B in Back Taxes
• Washington Post, IRS: Number of Federal Workers Owing Back Taxes Jumps by Nearly 12 Percent in 2011, to 312,000

IRS Releases Winter 2013 SOI Bulletin

The IRS's Statistics of Income Division yesterday released (IR-2013-26) the Winter 2013 SOI Bulletin (Vol. 32, No. 3), with these articles:

• Individual Income Tax Returns, Preliminary Data, 2011 (p. 4), by Jessica Holland & Michael Parisi
• Individual Income Tax Rates and Shares, 2010 (p. 18), by Adrian Dungan & Michael Parisi
• Individual Noncash Charitable Contributions, 2010 (p. 64), by Pearson Liddell & Janette Wilson
• Split-Interest Trusts, Filing Year 2011 (p. 92), by Lisa Schreiber Rosenmerkel
• Domestic Private Foundations and Related Excise Taxes, Tax Year 2009 (p. 113), by Cynthia Belmonte
• Controlled Foreign Corporations, 2008 (p. 169), by Lee Mahony & Randy Miller

Forbes:  New IRS Data: Rich Got Richer, But Paid Lower Tax Rate As Stocks Gained, by Janet Novack:

The IRS today released a new report showing that in 2010, as the nation’s stock markets recovered, the richest Americans saw their share of all national income rise and their effective federal income tax rate fall.

In 2008 and 2009, the wealthy saw their share of national income decline and their tax rates rise, in large part because their more lightly taxed capital gains fell.  But in 2010, the top 1% (the 1.35 million families with adjusted gross income above $369,691), reported  18.87% of all AGI, up from 17.21% in 2009. Meanwhile their average tax bill (as a percentage of AGI) fell to 23.39% in 2010, from 24.05% in 2009.

The trends were even more favorable for the top 0.1% (the 135,000 households with income above $1.6 million), who captured the lion’s share of the 1%’s income gains, garnering 9.24% of all AGI, up from 7.94% in 2009. The tax rate paid by the top 0.1% fell to 22.84% in 2010 from 24.28% in 2009, meaning they paid a lower rate than their less rich fellow 1 per-centers.   As a result, while the share of all income taxes paid by the top 0.1% also rose—to  17.88%, from 16.91% in 2010—it rose by less than the increase in their share of total national income.

IRS Tax Attorney Jobs

• Attorney-Adviser, Special Counsel (Tax-International), Office of Chief Counsel (Salary: $123,758 to $155,500)
• Attorney-Advisor (Tax), Senior Technical Reviewer, Office of Chief Counsel (Salary: $123,758 to $155,500)
• General Attorney (Tax), Senior Counsel, Office of Chief Counsel (Salary: $123,758 to $155,500)
• General Attorney (Tax), Office of Associate Chief Counsel (International) (Salary: $105,211 to $136,771)
• General Attorney (Tax), Office of Division Counsel Large Business and International (LB&I) (Salary: $102,204 to $148,806)

IRS Tries to Slow Walk Whistleblower Payouts

Fortune:  Incentives for Tax Fraud Tipsters May Get Even Tinier, by Lynnley Browning:

The IRS wants to shrink payments to tax fraud whistleblowers, even though it's only rewarded three people under the program since 2006.

Hoping to win millions of dollars from the IRS for exposing tax fraud? It's going to get even tougher -- and some powerful people in Washington are not amused.

In January, Sen. Charles Grassley, the 79-year-old Iowa Republican, chastised acting IRS commissioner Steven Miller over his recent proposal to restrict the agency's whistleblower program, already an object of criticism since its creation in 2006. The proposed curbs, Grassley wrote in a letter to Miller, showed one thing: that the IRS and its boss, the Treasury Department, "view whistleblowers with hostility."

What exactly is at issue? The current whistleblower rules say a tipster can collect a reward of 15%-30% of proceeds brought in as a direct result of a tip. The dirt has to involve tax evasion of at least $2 million or tax fraud by an individual making at least $200,000 a year.

Miller's proposed restrictions will likely shrink payouts. Among the curbs: making it nearly impossible for whistleblowers to share in rewards stemming from a company's inflation of losses, and excluding from rewards any money brought in from so-called Fbar fines. These draconian fines, levied on offshore tax evaders, are often dozens and even hundreds of times the amount of actual back-tax an evader must pay.

But here's the rub in this unusual political fight: Even in its current structure, very few whistleblower claims get paid, thanks to bureaucratic foot-dragging at the IRS, according to lawyers representing whistleblowers. Despite receiving more than 1,960 claims since 2006, the IRS made its first payment only in 2011. In total, it has paid only three claims. The biggest: $104 million to convicted felon Bradley Birkenfeld, the former UBS AG private banker who kick-started the investigation of Swiss banks. Tens of thousands of other claims that the IRS did not put into a prior, far less lucrative rewards system put in place before 2006 have languished; those that did result in rewards produced much smaller bounties for their tipsters.

Still, that's not stopping Grassley, the ranking member on the Senate Judiciary Committee and author of the original bounty regulations. And the senior senator, who criticizes the program for its opacity and "suspension" of hundreds of claims, is not alone in his ire.

A grassroots campaign started by the National Whistleblower Center, an advocacy group, saw more than 670 barb-laden letters from lawyers and ordinary citizens, an unusually high number, flood Miller's desk over the past two months. 

IRS Releases 2012 Taxpayer Attitude Survey

The IRS Oversight Board has released the results of its 2012 Taxpayer Attitude Survey of 1,500 respondents:

• 95% indicated that personal integrity has the greatest influence on whether they honestly report and pay their taxes, but the influence of IRS audits and third-party information reporting appears to be growing.
• 93% said it is important that return preparers meet competency standards.
• 87% said it was “not at all acceptable” to cheat on your income taxes. The percent of taxpayers that expressed some tolerance for tax cheating (whether “a little here and there” or “as much as possible”) dropped to 11% in 2012—one of the lowest levels ever recorded in the IRS Oversight Board’s survey

• 86% of the taxpayers indicated they were likely to use the IRS website and 76 percent said they were likely to use e-mail to send questions directly to the IRS.
• 76% of taxpayers were satisfied with their personal interaction with the IRS.
• 67% felt the IRS should receive extra funding to assist more taxpayers.

The Impact of Sequestration on the IRS

• Bloomberg-BNA, IRS Memorandum
• National Treasury Employees Union Press Release, IRS Employees Told of Potential Furloughs of 5 to 7 Days
• Accounting Today, IRS Employees May Face 5- to 7-Day Furloughs from Sequester
• Bloomberg, Prisoners Join Astronauts in U.S. Spending-Cut Fallout
• Chicago Tribune, Federal Sequestration Could Affect Speed of Tax Refunds
• Forbes, IRS Won't Delay Tax Season For Sequestration
• Huffington Post, The IRS Sequestration: Why You Should Care, and What It Means
• Politico, Sequestration: Expecting a Tax Refund? It May Be Delayed
• Politico, Sequestration Taxes IRS Fight Against Fraud
• Wall Street Journal, IRS Furloughs to Begin After Tax Season
• Washington Post, IRS Will Not Furlough Until After Tax Filing Season

TIGTA: IRS Wastes Millions in Internet Access Fees for Employee Laptops and Blackberrys

The Treasury Inspector General for Tax Administration today released Inadequate Aircard and BlackBerry Assignment and Monitoring Processes Result in Millions of Dollars in Unnecessary Access Fees (2013-10-010):

In Fiscal Year 2011, the IRS had approximately 35,000 active aircards and more than 4,400 BlackBerrys assigned to employees, providing them with mobile Internet and e-mail access.  TIGTA found that cost savings can be achieved if the IRS ensures that only those employees with a valid business need are assigned an aircard and/or BlackBerry and provides more effective oversight and monitoring of these devices.  Improved policies and procedures can result in savings of $5.9 million over five years. ...

Processes for assigning and monitoring the use of aircards and BlackBerrys are not adequate to ensure that employees have a business need for the devices.  Assignment of these devices is generally based on job series classifications without adequately ensuring a business need exists.

In addition, the IRS paid approximately $1.1 million during Fiscal Year 2011 for 13,878 aircards and 754 BlackBerrys that were not used for periods of three months to one year.  For example, TIGTA identified 45 aircards and 68 BlackBerrys that were not used at all for the entire 12 months of the fiscal year. 

Finally, 2,560 employees may have been assigned an aircard or BlackBerry without required management approval.  These devices cost the IRS more than $950,000 in Fiscal Year 2011, or about $4.8 million over five years. 

GAO Removes IRS Modernization, Keeps Tax Gap, as High-Risk Area

The Government Accountability Office yesterday released High-Risk Series An Update (GAO-13-283), in which the GAO removed one tax area from its list of 30 high-risk areas:

IRS Business Systems Modernization. The IRS made progress in addressing significant weaknesses in information technology and financial management capabilities. IRS delivered the initial phase of its cornerstone tax processing project and began the daily processing and posting of individual taxpayer accounts in January 2012. This enhanced tax administration and improved service by enabling faster refunds for more taxpayers, allowing more timely account updates, and faster issuance of taxpayer notices. In addition, IRS has put in place close to 80% of the practices needed for an effective investment management process, including all of the processes needed for effective project oversight. 

But Enforcement of Tax Laws remains a high-risk area:

The IRS recently estimated that the gross tax gap—the difference between taxes owed and taxes paid on time—was $450 billion for tax year 2006. For a portion of the gap, IRS is able to identify the responsible taxpayers. IRS estimated that it would collect $65 billion from these taxpayers through enforcement actions and late payments, leaving a net tax gap of $385 billion. The tax gap has been a persistent problem in spite of a myriad of congressional and IRS efforts to reduce it, as the rate at which taxpayers voluntarily comply with U.S. tax laws has changed little over the past three decades. Given that the tax gap has been persistent and dispersed across different types of taxes and taxpayers, coupled with tax code complexity and a globalizing economy, reducing the tax gap will require applying multiple strategies over a sustained period of time.

IRS enforcement of the tax laws is vital for financing the U.S. government. Through enforcement, IRS collects revenue from noncompliant taxpayers and, perhaps more importantly, promotes voluntary compliance by giving taxpayers confidence that others are paying their fair share. GAO designated the enforcement of tax laws as a high-risk area in 1990.

IRS Whistleblower Office Issues Annual Report to Congress

The IRS's Whistleblower Office has released its FY 2012 annual report to Congress:

In FY 2011, the Whistleblower Office paid the first claims under § 7623(b). Five claims have been paid under the revised law. ... During FY 2012, the IRS received 332 whistleblower submissions relating to 671 taxpayers that, based on the face of the submissions, appear to meet the threshold of $2,000,000 in tax, penalties, interest, and additions to tax in § 7623(b). Many of the individuals submitting information to the IRS claimed to have inside knowledge of the reported transactions, often including extensive documentation in support of their claims. The IRS does not yet know how many of these cases will result in collected proceeds after examination or investigation, as the amounts alleged reflect only the whistleblower’s estimate of the potential recovery. Twelve of 128 claims paid in FY 2012 involved collections of more than $2,000,000.

 

IRS Oversight Board Releases 2012 Annual Report to Congress

The IRS Oversight Board yesterday released its 2012 Annual Report to Congress:

[T]he IRS Oversight Board praised the IRS for the progress it achieved over the past fiscal year that contributed to the effectiveness, efficiency and integrity of the nation's tax system. However, the Board also warned that the IRS is operating in a high-risk environment. Specifically, budget constraints have resulted in lower staffing levels, and in turn, reduced customer service levels. Further budget cuts could potentially erode the agency's ability to collect revenue to fund essential government programs, the Board cautioned. The report also called for continued progress in the fight against tax refund fraud and stated that the IRS must stay focused on its key mission and strategic goals in spite of an expanded portfolio of duties.

• Federal News Radio, IRS Budget Woes, Shrinking Staff Threaten to Derail Agency
• Treasury Inspector General for Tax Administration, Improvements Have Been Made to Address Human Capital Issues, but Continued Focus Is Needed (2013-10-017)

Taxpayer Sues IRS, Claims Agent Coerced Him Into Having Sex to Avoid Adverse Audit

Huffington Post:  Vincent Burroughs Accuses IRS Agent Dora Abrahamson of Coercing Sex by Using Threat of Tax Penalty:

An Oregon man has filed a lawsuit against an IRS agent with whom he had sex, claiming he was coerced into the relationship because the woman showed up at his door "provocatively attired" and threatened him with a tax penalty.

Vincent Burroughs, 40, of Fall Creek filed the lawsuit last week in federal court in Eugene. The agent, Dora Abrahamson, and the federal government are listed as defendants, and Burroughs wants a jury to award him unspecified punitive damages.

According to the suit, Abrahamson contacted Burroughs about an audit in August 2011. Abrahamson allegedly told Burroughs "she knew who he was, and that it was lucky for him that this was the case, and that they should meet." The agent subsequently flirted with Burroughs over the telephone and via text messages, offered him massages and sent him a photo of herself in her underwear, the lawsuit states.

Burroughs initially ignored the woman's advances, according to the lawsuit, but he surrendered after a "provocatively attired" Abrahamson arrived at his home in September 2011, the lawsuit states.

"She told (Burroughs) that she could be a bitch, or that she could be nice," the suit states. "She said that she could impose no penalty, or a 40% penalty, and that if he would give her what she wanted, she would give him what he needed."

• The Register-Guard, Fall Creek Man’s Lawsuit Alleges Coercion by IRS Agent

(Hat Tip: Robert Nassau.)