IRS unmasked: Away from politics, America's tax agency has lots of warts, and ammunition
Aside from history of alleged abuses, tax agency struggles with customer service, data security and audit targeting.
The Internal Revenue Service has long been a political football. Democrats alleged that in the 1960s it was used by Lyndon B. Johnson and Richard Nixon to subvert civil rights and anti-Vietnam War activists, while Republicans alleged a decade ago it wrongly targeted Tea Party and other conservative groups.
More recently, Democrats have argued the tax agency needs $80 billion in new enforcement to end tax cheating and ease budget deficits, while Republicans say the new spending signed by President Joe Biden will only create an army of 87,000 armed agents intent on wreaking havoc on the middle and working classes.
With so much emotion, scandal and political rhetoric, it's sometimes hard for everyday Americans to sort fact from fiction. So the team here at Just the News did a deep dive to put together a list of facts about the IRS that aren't in dispute, from whom it audits to why it buys ammunition and arms its agents.
Here's what we found:
The IRS has disproportionately audited poorer Americans in recent years.
An analysis by Syracuse University's Transactional Records Access Clearinghouse (TRAC) found that low-income wage earners with less than $25,000 in total earnings were audited at a rate five times higher than everyone else in fiscal year 2021. The reason? IRS has put an emphasis on auditing beneficiaries of the Earned Income Tax Credit, which is used predominantly by poor and working-class families.
News site ProPublica found that based on 2017 tax return information, Earned Income Tax Credit recipients were audited at twice the rate of taxpayers with income between $200,000 and $500,000. Only millionaires had a higher audit rate, the news organization found.
The investigative arm of Congress confirmed such findings in a report this spring, saying audits disproportionately affected people making less than $200,000.
"From fiscal years 2010 to 2021, the majority of the additional taxes IRS recommended from audits came from taxpayers with incomes below $200,000," the Government Accountability Office reported.
"Audits of the lowest-income taxpayers, particularly those claiming the EITC, resulted in higher amounts of recommended additional tax per audit hour compared to all income groups except for the highest-income taxpayers," it added.
IRS auditing of wealthier Americans has been declining.
The GAO also reported in May that while audit rates have been falling in recent years in all income levels, they dropped the most for taxpayers with incomes of $200,000 or more. "Audit rates decreased more for higher-income taxpayers," GAO told Congress, blaming the complexity of finances and legal and accounting resources of wealthy Americans for the drop.
The most audited counties in America fall heavily in rural black and Hispanic counties in the South.
A 2019 study of IRS audits by geography found the five counties with the highest audit rates are all predominantly black, rural counties in the Deep South. Audit rates were also high in Hispanic counties in South Texas and in South Dakota counties with Native American reservations.
The most audited county, according to the study, was Humphreys County in Mississippi, where median income was $26,000 and more than half the taxpayers claim the earned income tax credit. The study found Humphreys is audited at a rate 51% higher than Loudoun County, Va., in the wealthy Washington D.C. suburbs, where the median annual income is $130,000.
Nonpartisan projections have found increased audits under the Biden plan will heavily impact middle- and working-class Americans.
The nonpartisan Congressional Budget Office has projected Democrats' proposed boost in IRS funding under the Inflation Reduction Act would increase tax collections by about $200 billion from 2023 to 2031. Last month, the bipartisan Congressional Joint Committee on Taxation estimated between 78% and 90% of that $200 billion will come from those making less than $200,000 a year. Only 4% to 9% is expected to come from those making more than $500,000, the committee said.
"This so-called Inflation Reduction Act, now called the climate bill, is going to raise taxes on middle class families, is going to hire up to 87,000 new IRS agents targeted mainly at what I would call value shoppers, the neighbors I see at Target and Walmart and Marshalls and Ross, where every penny really matters," Rep. Kevin Brady (R-Texas), the top Republican on the House Ways and Means Committee, told Just the News on Monday.
"Americans from hardworking families who are already being crushed with inflation and fuel costs and who worry most about losing their job now are going to face tax hikes, and an army of IRS agents," he added.
Unlike most Americans, IRS employees have been working predominantly from home.
While the IRS workforce will markedly expand under the Democrat law, more than half the agency's employees were working from home as of April. And that trend began well before the pandemic and has only grown since.
"So, 53% of the employees are in a full-time telework capacity," IRS Commissioner Charles Rettig told Congress in April. "The rest of the employees either have a blended capacity or they're site. Every employee who has interaction with respect to what the major issue, the inventory, the submission process, the accounts management, they came back in June 2020 socially distant environment."
In-person operations for all employees resumed June 25, but employees were still given the option to telework at least some of the time. IRS leadership didn't return to the office until April 24, and even then they were required to work in the office only once per pay period.
The October 2021 collective bargaining agreement between the National Treasury Employees Unions and the IRS further expanded the number of positions eligible for remote work, including the representatives for the agency's much criticized customer services.
The IRS telework program is far outside most Americans' experience. Just 7.7% of all American workers surveyed in April by the Bureau of Labor Statistics reported working remotely.
IRS customer service has been declining, and was rated "horrendous" by its own internal watchdog.
IRS customer service has been declining for years, with backlogs of tax returns and customer complaints soaring. National Taxpayer Advocate Erin M. Collins, however, called 2021 the "most challenging year taxpayers and tax professionals have ever experienced."
"There is no way to sugarcoat the year 2021 in tax administration: From the perspective of tens of millions of taxpayers, it was horrendous," Collin wrote in her annual Purple Book assessment as the agency's independent watchdog for taxpayers.
Collins laid bare the agency's many faults: individual and corporate returns faced long processing times, and refunds were massively delayed, taxpayers had a hard time reaching the IRS by phone, and their correspondence went unprocessed by the agency for "many months."
"The IRS is in crisis and needs to apply resources to its core mission — processing these returns and paying the corresponding refunds," the report added.
The IRS this summer reported 21.3 million taxpayer returns were backlogged, up more than 1 million from a year earlier. "Unfortunately, at this point the backlog is still crushing the IRS, its employees, and most importantly, taxpayers," Collins reported in June.
Democrats and Republicans agree the IRS is failing at its core mission, but the new Inflation Reduction Act spends little to address the core capabilities of the agency's customer service.
"I think they've got some awfully good workers there," Rep. Brady said. "But they need to be back to work. They need to be more productive."
IRS employees have egregiously leaked or failed to protect the privacy of taxpayers' data.
Earlier this month, the agency confirmed it improperly published online the private financial information of roughly 120,000 taxpayers. The improper disclosure of Form 990-Ts included names and contact information of the filers, as well as significant portions of their financial records, officials said. Worse yet, the leak wasn't discovered by the IRS but by an outside party.
Meanwhile, the agency has yet to punish anyone for a 2021 leak to the news site ProPublica of private tax information on some of America's wealthiest taxpayers, including Jeff Bezos and Warren Buffett. The news site said the leaked IRS records were provided through "secure systems that allow whistleblowers to transmit information to us without revealing their identity."
That report found that the IRS completed 1,694 investigations into the "willful unauthorized access of tax data by employees" and 27% of the cases were deemed violations. But most of the violations resulted in the offending employee's suspension, resignation, or removal rather than prosecution. In fact, the IRS only closed 25 cases that had a criminal indictment returned against the employee being investigated.
Amid backlogs and leaks, IRS paid tax relief to dead taxpayer, prisoners on death row.
Earlier this year, a Treasury Department inspector general report found the IRS sent $64 million in erroneous payments to dead Americans under the American Rescue Plan due to a computer error of which the agency was aware but did not fix.
"We alerted the IRS to this programming error in April 2021," the report stated. "IRS management agreed that these payments were issued erroneously. However, IRS management did not provide their corrective action to address future erroneous payments."
Just a few months after that revelation, the IRS admitted to Rep. Don Bacon (R-Neb.) it made stimulus payments to 1.1 million incarcerated prisoners totaling $1 billion, with recipients including murderers in prison for life and one of the terrorist bombers from the Boston Marathon attack. The IRS said it made the payments because nothing in the law banned prisoners from applying. Lawmakers were incredulous.
Yes, the IRS buys lots of guns and ammunition.
The often-provocative Rep. Matt Gaetz (R-Fla.) recently made waves by introducing legislation banning the IRS from buying more ammunition, touching off a debate among conservatives.
The IRS has had armed criminal investigative agents since the days of the Al Capone investigation, some who partner with other crime-fighting agencies like the FBI and Drug Enforcement Agency that target dangerous criminals like drug cartel members and mobsters. The everyday auditors most Americans encounter are not armed and never have been.
That said, the IRS still has spent a good amount of money on arms and ammunition, about $4.5 million between 2015 and 2019, according to a study of federal weapons purchases by the nonpartisan Open the Books nonprofit watchdog.
That report found the tax agency had bought 4,600 weapons, including 3,282 pistols, 621 shotguns, 539 rifles, 15 fully automatic weapons and four revolvers. It also had a stockpile of about 5 million rounds of ammunition.
The IRS defended the purchases, saying the ammo is mostly used at its training facility in Georgia.
But some lawmakers think the armaments are disproportionate to the IRS mission to pursue tax dodgers.
"I can't think of why the IRS needs ammo," said Rep. Warren Davidson (R-Ohio), a military veteran. "... I will say that they probably have more training ammo than some of the infantry units that I was in at the time. These guys are hard-pressed to get ammo to train with."
The Facts Inside Our Reporter's Notebook
- Democrats alleged that in the 1960s
- Republicans alleged a decade ago it wrongly targeted Tea Party
- ProPublica found
- GAO also reported
- A 2019 study of IRS audits by geography
- Humphreys County in Mississippi
- IRS Commissioner Charles Rettig told Congress in April
- guidance in May
- October 2021 collective bargaining agreement
- 7.7 percent of all American workers surveyed in April by the Bureau of Labor Statistics reported working remotely
- National Taxpayer Advocate Erin M. Collins, however, called 2021 the "most challenging year
- annual Purple Book
- improperly published online
- federal felony
- GAO report on illegal leaks
- IRS only closed 25 cases that had a criminal indictment
- IRS sent $64 million in erroneous payments
- IRS admitted to Rep. Don Bacon (R-Neb.) it made stimulus payments to 1.1 million incarcerated prisoners
- Rep. Matt Gates (R-Fla.) recently made waves by introducing legislation
- study of federal weapons purchases by the nonpartisan Open the Books