IRS Failing To Chase Up Businesses That Break Tax Laws

by Mike Godfrey, Tax-News.com, Washington

14 August 2003

The Internal Revenue Service is failing to follow through on a high number of investigations involving businesses that have transgressed taxation laws, according to a report from the Treasury Inspector General for Tax Administration.

Citing 1,841 cases where firms have either failed to withhold taxes on behalf of their employees, or have filed frivolous returns, the report found that only 233 of these actually made it onto the relevant IRS database, and then only half of the returns on the database were properly followed up.

The report also divulged that at least 165 taxpayer files have been lost, and cited several cases where investigations have had to be abandoned because the necessary paper-work was not in order.

The Inspector General's report however, praised the Revenue's track record on the 'Section 861' issue that many tax protesters argue excludes certain citizens and companies from domestic taxes. The report noted that the IRS has taken out civil injunctions against nine promoters of 861 schemes (eight of which have been issued, with one more in the process of being issued).

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