dubya's Repug operatives in IRS letting corps escape with $Bs

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January 12, 2007

Agents Say Fast Audits Hurt I.R.S.

By DAVID CAY JOHNSTON

Top officials at the Internal Revenue Service are pushing agents to prematurely close audits of big companies with agreements to have them pay only a fraction of the additional taxes that could be collected, according to dozens of I.R.S. employees who say that the policy is costing the government billions of dollars a year.

“It’s catch and release,” said Douglas R. Johnson, an I.R.S. auditor in Colorado for three decades who said he grew so frustrated at how large corporations were allowed to pay far less than what he thought they owed that he transferred to the agency’s small-business division.

With one exception, other working agents would talk about the issue only on condition they not be identified because they feared being fired. They said a policy intended to avoid delays in auditing corporations was being pushed so rigidly that it prevented them from pursuing numerous examples of questionable corporate tax deductions.

I.R.S. officials said the complaints were misguided. In an interview yesterday, Debbie Nolan, the I.R.S. executive in charge of auditing large and medium-size businesses, denied that audits were being closed over the objections of agents who had evidence that significant additional taxes were owed. Ms. Nolan said she had not heard any such complaints from auditors.

She noted that the amount of additional tax recommended for each hour auditors spend on large and medium-size companies more than doubled, to $5,195 in 2006 from $2,394 in 2002. And she said that internal reviews of corporate tax audits showed that their quality had improved.

“On the whole, we are moving in the right direction,” she said. “All of our indicators tell me that we are doing the right thing.”

But auditors said they were told to limit questioning only to those specific issues that the I.R.S. and the companies had agreed in advance to examine. When other questionable deductions emerged in the course of the audit, they said, additional taxes were ignored.

Rank-and-file auditors said that the sharp rise in tax dollars collected per hour of audit was not a sign of an improved auditing system but simply reflected the fact that abusive and illegal tax shelters had become so common that it was easy to find additional taxes due.

James Lynch, who retired 18 months ago after two decades auditing large corporations in the San Diego area, said that “of course dollars per hour are up, because they put in smaller teams and you just grab what you can and get out.”

Of roughly 50 auditors interviewed, only one said he agreed with the new policy, arguing that it was better to audit more companies lightly than a few thoroughly as a strategy to improve compliance with the tax laws. But even this agent agreed with the others that large companies were being allowed to pay far less than they owed.

Mr. Johnson and some of these agents also said that I.R.S. management reports indicate that the quality of audits was improving only because the agency did not accurately record these actions.

One longtime auditor in New York said that when ordered not to pursue an issue “you just write ‘closed per case manager’ to cover yourself.”

The auditor was asked why she did not file an official memo indicating that she disagreed and that she believed it was premature or improper to close the audit.

“Why would I do that?” the auditor replied. “So my manager will give me a bad performance review?” Others gave similar explanations.

Ms. Nolan said agents who believed that an important issue should have been pursued should report the matter to higher-level supervisors or go to the inspector general’s office. She said she was not aware of any such complaints.

But Coleen M. Kelley, president of the National Treasury Employees Union, said that Ms. Nolan should not be surprised that there was widespread unhappiness in the ranks about the quality of audits.

“We have been hearing complaints since they started the policies of short cycle time and limited-scope audits,” Ms. Kelley said. “These are policy decisions the I.R.S. has the right to make, whether they are right or wrong.”

She said any agent who went up the chain of command would have the complaint rejected out of hand.

“The agents are told that this is the scope of the audit and this is the time you have to deliver,” Ms. Kelley said. “Their professional judgment is being ignored.”

Ron McGinley said it was clear when the new policies went into effect in 2003, shortly before he retired as an I.R.S. economist in Southern California, that tax law enforcement was being weakened.

Mr. McGinley drew an analogy contrasting the I.R.S. approach to the way the government investigated John Gotti, the organized crime boss known as the Teflon Don.

“The way they limit audits,” he said, “is like the FBI going to the Teflon Don and saying, ‘We’d like to look around, so what are you willing to let us see?’ ”

Across the country, several presidents of local I.R.S. union chapters said there had been a steady flow of complaints from auditors, specialists and others who examine tax returns that they are not being allowed to do their jobs. They said some of the most highly trained and respected auditors had quit or plan to leave the moment they were eligible to retire.

“Agents in the large- and mid-sized business division complain to me constantly that what are supposed to be estimated dates to complete audits are hard deadlines,” said Frank Heffler, president of the local in Manhattan, which has the largest contingent of I.R.S. corporate tax auditors.

The auditors said that many companies were cooperative, but others took advantage of the shortened time periods to delay turning over crucial do ents until the end of the audit.

Two auditors told of corporations that when asked for a specific do ent, produced thousands of pages of ill-organized material in an apparent effort to waste their time and limit the issues that would be fully examined. Both auditors said they complained to supervisors, but to no avail.

Kay Rogers, the union president in Orange County, Calif., said that official I.R.S. policy calls upon auditors to “do the right thing” and pursue an audit beyond the deadline if the issues warrant it. But in practice, Ms. Rogers said, that does not happen.

The reason, she explained, is because supervisors receive cash bonuses, promotions and other benefits based on closing cases within the time allowed, not on the quality of audits or the dollars collected.

“When a person is rewarded monetarily for keeping to the cycle time,” she said, they are going to close audits to get their reward.

Individual auditors in eight states, interviewed over the last seven months, told of case managers and higher supervisors ordering them to drop issues because it would prevent closing the audit by a predetermined date.

Many of these agents said they were troubled most when the sums involved pre-negotiated agreements with the I.R.S. on how much profit multinational companies could take overseas in tax havens and how much must be taken inside the United States.

“They are giving away the store,” one agent in New Jersey said.

Agents told of being refused access to specialists, including economists, engineers and historians, because if these specialists developed an issue the audit would have to continue past the deadline.

“They are not letting us do our job, which is to enforce the law,” said one I.R.S. auditor who handles the most complicated international cases.

Ms. Nolan, the official in charge of the division, said that such comments reflected the difficulty many I.R.S. veterans were having in adapting to new policies, not any flaws in those policies.

Mr. Lynch, the auditor who retired in California, and many others complained that the effect of the policy was to allow the Bush administration to achieve administratively a further easing of the corporate income tax burden far beyond what Congress has approved legislatively.

According to Melanie Fox, the only current auditor besides Mr. Johnson who agreed to be quoted by name, a large number of the most experienced corporate auditors plan to retire as quickly as they can because they feel their efforts are not respected.

“A lot of audit experience is about to walk out the door,” Ms. Fox said. “And then what will happen?”

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Business-friendly Repugs payback/protect/enrich the corps and super-rich. yawn.

But right-wingers complain about "en lements" and "welfare queens", yeah right. ing hypcrits.

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And here we go again.....

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January 10, 2007

I.R.S. Use of Private Debt Collectors Is Criticized

By LYNNLEY BROWNING

The national taxpayer advocate called on Congress yesterday to repeal the authority of the Internal Revenue Service to use private debt collectors.

In her annual report, the taxpayer advocate, Nina E. Olson, said the private debt collection program was economically inefficient and prone to abuse. In particular, she faulted the I.R.S. for not disclosing certain “psychological techniques” used by the private contractors to try to collect unpaid taxes.

The office of the taxpayer advocate was created by Congress to identify problems within the I.R.S. that affect taxpayers and to promote their interests before the agency and Congress, which writes the tax code.

Ms. Olson’s office provided its most extensive review yet of the private debt-collection program, which it has been monitoring for two years since plans for it were announced. The program, which formally started in September, is meant to farm out easily collectible tax bills, typically owed by low-income taxpayers, to private collection agencies. When the I.R.S. announced the program, it said that the private en ies would abide by the same publicly disclosed rules as I.R.S. employees.

Private debt collection has drawn criticism that it is not cost-efficient and that some of the private firms hired by the I.R.S. have questionable business practices. One firm hired by the agency was the law firm of Linebarger Goggan Blair & Sampson of Austin, Tex., whose former partner, Juan Peña, pleaded guilty to federal bribery charges for his role in winning a collection contract from the city of San Antonio.

The taxpayer advocate also criticized some of the techniques used by private collectors. “In an initial draft of this report, we cited sections of a collection script used by one of the contractors which used psychological tricks during the conversation to get the taxpayers to commit to a payment, which is then followed by a belated Fair Debt Collection Practices Act warning at the end of the conversation,” the report says.

“The I.R.S. informed us that private collection agencies had designated the ‘collection scripts’ and operational plans as proprietary and that we could not cite specific portions of the scripts.”

She then wrote that the I.R.S. had later asked the three private debt collection firms to release information on their practices. One firm complied, Ms. Olson wrote, the second released partial information, and the third refused to release any information.

In a brief telephone interview yesterday, Ms. Olson said, “Taxes are the lifeblood of government; to have private agents collecting them changes the relationship between the taxpayer and government.”

In its written response to Ms. Olson’s criticism of the private debt-collection program, the I.R.S. said that it “strives to make certain that P.C.A. employees adhere to the same guidelines and restrictions as I.R.S. employees.” P.C.A. refers to private debt collectors.

The I.R.S. also said that it had taken steps to have all three private debt collection firms approve the release of the do ents sought by Ms. Olson, and that it was releasing “other appropriate information.”

The I.R.S. began using three private debt collectors last September for 12,500 cases considered easy to collect, and expects to process 446,000 cases over two and a half years, Ms. Olson wrote. The collectors keep 25 cents of every dollar they collect. So far they have collected just 8 percent of the dollars assigned to them, she wrote — less than certain I.R.S. units with more difficult collection cases.

“Our conclusion is that this initiative is fatally flawed, risking much for a small return on investment,” she wrote.

The commissioner of internal revenue, Mark W. Everson, has said that if the I.R.S. had more money it would not have to outsource tax collection to private firms.

Ms. Olson also noted a 36 percent rise last year in demands, called notices of levy, that the I.R.S. sends to delinquent taxpayers asking them to settle their bills with the agency. A significant portion of such demands were served on elderly or disabled taxpayers, she wrote.

In her report, Ms. Olson also recommended that Congress improve funding for the I.R.S., which received $10.6 billion to collect $2.2 trillion, or 98 percent of all federal revenue. She also recommended, for a second consecutive year, that Congress protect not-guilty spouses from the burdens of tax crimes, by repealing joint and several liability rules. She also called upon Congress to create a federal oversight agency to supervise quasigovernment retirement plans, “to ensure that they are carrying out their fiduciary duties.”

Ms. Olson also said that the I.R.S. failed to turn over do ents concerning its internal deliberations on tax matters. This was the first time that the I.R.S. failed to turn over do ents requested by the office of the taxpayer advocate, she said.

“The effect of this refusal is to thwart Congressional intent in seeking a taxpayer perspective on potential problems within the I.R.S.,” Ms. Olson wrote. “As a consequence, Congress is being left in the dark, and taxpayers are being harmed.” Ms. Olson did not specify in her report what types of do ents she was looking for or what issues they addressed.

In its response, the I.R.S. said that it was “committed to improving the way it manages instructions to staff.”

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