IRS Found Wanting In Criminal Enforcement

by Mike Godfrey, Tax-News.com, Washington

16 March 2004

A report compiled by the Treasury Inspector General for Tax Administration and seen by the Washington Post, has revealed that the Internal Revenue Service is failing to follow up non-payment of penalties and fines in a high number of cases.

According to the Post, the report has revealed that of 172 tax convictions examined, over $2.5 million in back taxes, interest and penalties went unpaid by offenders.

One example of the IRS’s apparent indifference to the problem was illustrated by the 37 cases closed by the agency’s criminal investigation division with probationary periods ending between 2000 and 2002, of which only six individuals actually complied with the terms of their sentence. However, in eleven cases, the offenders had not been informed of the terms of their penalties by the IRS, and in twelve cases, the tax collector failed to notify the offenders’ probation officers or the courts.

Many of the problems would appear to stem from a lack of communication or liaison between the IRS departments responsible for handling criminal cases. For instance, the study shows that criminal investigators failed to inform the small-business division that penalties had been assessed in half of the 26 cases of known non-compliance studied. Similarly, the small business division neglected to tell investigators of cases of non-paid tax in six out of fifteen examples studied.

Many senior political figures have lambasted the IRS over the latest figures, which come hot on the heels of statistics that show audit rates remain at almost record low levels.

The report concluded that the IRS’s poor track record in enforcement could undermine the judicial system and seriously erode public confidence in the tax system, the Post revealed.

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