IRS employees owe $30 million in delinquent taxes
Thousands of employees at the Internal Revenue Service (IRS) owe a collective $30 million in back taxes, according to an audit published last week by the Treasury Department Inspector General for Tax Administration.
‘The irony and hypocrisy can’t be missed here’
The audit found that 2,044 IRS employees owe $12,169,374 in taxes and have not worked out an installment plan, which means they have not begun to pay the balance. In addition, 1,729 contractor employees owe $17,352,041 and have also not agreed to an installment plan.
The audit had been requested by Sen. Joni Ernst (R-IA), who noted that Joe Biden’s Inflation Reduction Act in 2022 allocated $80 billion to the IRS.
“Surely the irony and hypocrisy can’t be missed here: taxpayers are being forced to pay billions more to the IRS to audit America while the agency won’t even collect the tens of millions of dollars in unpaid taxes owed by its employees,” said Ernst.
Lenience for non-compliant employees
The inspector general also discovered that IRS management is lenient on employees who are tax non-compliant. An employee can be non-compliant in more than one area; for example, failing to file tax returns and failing to pay taxes count as two counts of non-compliance.
Between April 2021 and October 2023, IRS management initiated disciplinary action proceedings against 1,068 employees who were tax non-compliant. Seventy of those employees were found to have either willfully refused to file taxes or willfully underreported their income. Only 20 were fired.
“Although the law requires an employee who has either willfully not filed or willfully understated their taxes due to be removed, subject only to the IRS Commissioner’s mitigation, this disciplinary action is not always enforced,” said the report.
An additional 69 employees who had willfully violated tax laws were referred to a Review Board which recommended that the IRS commissioner treat most of them leniently or let them off the hook entirely. The Review Board cited the employees’ years of service, performance ratings, past tax compliance, and cooperation during the investigation as reasons why their cases should be “mitigated.”
Furthermore, between 2005 and 2022, the IRS rehired 512 former employees who had non-compliance issues or performance issues. These included 15 former employees who had committed fraud or theft, over 100 who had tax noncompliance issues, and 24 who willfully violated tax laws.
In response to the audit, the IRS simply noted that the IRS commissioner is allowed to mitigate non-compliance cases at will, and does so. “[F]or certain offenses, including the willful failure to file a tax return and willful understatement of a Federal tax liability, IRS employees shall be terminated unless the IRS Commissioner decides to mitigate the penalty of termination . . . The Commissioner exercised this authority,” the IRS commented, as reported by The Daily Wire.
Cracking down on low-income Americans
While its employees are often granted clemency, the IRS has been increasing audits on low-income families.
According to a report from Syracuse University’s Transactional Records Access Clearinghouse (TRAC), in 2022 the IRS subjected low-income taxpayers to “unbelievably high” audit rates — over five times more than nearly everyone else. On the other hand, just 1.1% of millionaires — those who earned a million dollars or more in positive income — were audited.
The IRS has found it easier to conduct correspondence audits through the mail, which is more feasible with lower-income tax returns. Such audits are automated and usually begin with a letter from the IRS asking the taxpayer for more documentation. In FY 2022, 85% of all 1040 audits began with such a letter, compared with 48% of millionaire audits.
Low-income Americans ‘are easy marks’
The report explained that lower-income wage earners “are easy marks in an era when the IRS increasingly relies upon correspondence audits yet doesn’t have the resources to assist taxpayers or answer their questions.”
While the chance of a millionaire being audited increased to 2.8% last year, this still left nearly 700,000 millionaires who escaped scrutiny.
Furthermore, despite the Biden administration repeatedly vowing to only increase taxes for those making $400,000 or more, a corporate tax embedded in the Inflation Reduction Act is expected to hit the lower-income class hard.
“As a result of the policy, those with incomes below $200,000 would pay almost $17 billion in combined additional tax in 2023, according to a Joint Committee on Taxation analysis published July 29,” reported CNBC. According to the analysis, only 4%–9% of tax revenue from the Act’s $80 billion in spending will come from businesses making above $500,000.
Small businesses ‘won’t fight back’
National Taxpayers Union Foundation Executive Vice President Joe Hinchman told the New York Post why Biden’s IRS is targeting small- and medium-sized businesses (SMBs).
“The IRS will have to target small and medium businesses because they won’t fight back,” said Hinchman. “We’ve seen this play out before. . . . [T]he IRS says, ‘We’re going after the rich,’ but when you’re trying to raise that much money, the rich can only get you so far.”
Hinchman explained that the IRS typically goes after SMBs also because they don’t have the financial bandwidth to challenge the agency in court.
“The approach here is to double the IRS workforce, take the leash off, and see how much they can collect,” Hinchman added. “I think they’ll collect it but it will be quite painful.”
