The IRS Faces a Broad Audit From the US Government

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What goes around comes around, as they say. The IRS, forever America’s most frequently cursed-out bureaucracy, now finally knows the piercing glare of federal government scrutiny.

The U.S. Treasury Inspector General for Tax Information, or Tigta, began an audit on the IRS late last year that is probing potential conflicts of interest between the tax-collecting agency and large and international companies, The Wall Street Journal reported Thursday.

It’s the Eye of the Tigta

Among the audit’s chief points of inquiry is the revolving door between the accounting industry and the IRS, as well as why specific whistleblower cases within the agency have either been abandoned or left untouched for years, according to the Journal’s sources.

However, a Tigta spokesperson told the Journal the audit is still in an exploratory phase, with no official scope or time frame yet. They also did not say whether specific allegations and cases are under investigation or if the probe is limited to a general review of policies. But the inspector general has reportedly taken a special interest in a handful of IRS processes:

  • The auditors are investigating the wide array of complex tax-avoidance structures and transactions multinational corporations use that are difficult for the IRS to spot – as well as how the agency is wielding Congressionally-created tools designed to combat these abusive tax practices.
  • In particular, Tigta is interested in the IRS’s “fairly thin” record of using a 2010 law that exacts a 40% penalty on taxes avoided via transactions lacking “economic substance”.

SECc’d: In comparison to the Security and Exchange Commission and the Department of Justice, the IRS is perceived by industry insiders as running a less effective whistleblower program. Each agency incentivizes whistleblowers with a cut of the money recovered by the government as a result of tips. While both the SEC and the IRS have awarded whistleblowers roughly $1 billion since the creation of each program, the IRS’s bounty system is three years older than the SEC’s – potentially leading Tigta to question its efficacy.

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