Tax Administration

At a congressional hearing last year, witnesses alleged that senior managers at the Internal Revenue Service (IRS) did not receive the same level of disciplinary action as line staff and that the agency delayed action on substantiated cases of misconduct until senior managers were eligible to retire. The witnesses also said that IRS retaliated against whistleblowers and uncooperative taxpayers and that IRS employees zeroed out or reduced proposed tax assessments for reasons unrelated to the merits of the cases. GAO evaluated these charges. Available data showed significant differences between senior executive and line staff disciplinary cases in terms of disciplinary and processing times. For example, a much higher percentage of cases involving senior executives was cleared or closed without action, and these cases tended to take longer to complete. At the same time, actions taken against lower-level employees more closely conformed to IRS' established table of penalties than did actions taken against higher-level employees. However, offenses committed by senior executives and line staff, as well as the factors surrounding the cases, were different. GAO's ability to compare these disciplinary cases was also hindered by a lack of detailed and accurate data in connection with IRS' disciplinary case database. GAO did not reach general conclusions about IRS' delaying action on misconduct cases until senior managers were eligible to retire. GAO could not determine the extent of reprisals against whistleblowers or retaliation against taxpayers because IRS does not maintain information on these cases. GAO found no evidence in the eight cases it reviewed to support allegations of improper zeroing out or reductions of recommended taxes by IRS managers. On the other hand, IRS does not systematically collect data on how much additional taxes recommended by auditors are inappropriately zeroed out or reduced by IRS employees. In particular, IRS has no data on supervisors' improperly limiting auditors' recommendations of additional taxes before an audit was closed.

GAO noted that: (1) available data showed significant differences between Senior Executive Service and line staff disciplinary cases in terms of dispositions and processing times; (2) IRS found that actions taken against lower-level employees more closely conformed to its established table of penalties than actions taken against higher-graded employees; (3) regarding the allegation that the Deputy Commissioner delayed action on senior manager misconduct cases until the managers were eligible to retire, GAO focused on actual retirements and did not reach general conclusions about eligibility to retire; (4) GAO found no cases in which an individual who was ineligible to retire when an allegation was filed, retired while the case was pending with the Deputy Commissioner; (5) GAO could not determine the extent of reprisal against whistleblowers because IRS did not track whistleblowing reprisal cases; (6) regarding allegations of IRS retaliation against taxpayers, GAO previously reported that IRS information systems were not designed to identify, address, and prevent such taxpayer abuse; (7) with respect to allegations of improper zeroing out or reductions of recommended taxes by IRS managers, GAO found no evidence to support the allegations in the eight specific cases referred to GAO by the IRS employees who testified at the hearings; (8) on the other hand, IRS did not systematically collect data on how much additional taxes recommended by auditors were zeroed out or reduced by IRS employees without a basis in law or IRS procedure; (9) IRS has acknowledged equal employment opportunity-related problems, including problems in hiring and promotion, in its Midwest District Office and has begun addressing them; and (10) IRS' lack of adequate information systems and documentation in the areas of employee discipline, retaliation against whistleblowers and taxpayers, and zeroing out of recommended taxes prevented GAO from doing a more comprehensive analysis of these issues.