The IRS leaves it up to individual employees to decide what’s “fair” in audits, meaning the tax agency sometimes uses arbitrary criteria in deciding whom to review, the government’s chief watchdog said Wednesday in a report Republicans seized on as proof that unfair targeting could still be going on.
The Government Accountability Office did not find evidence of political targeting in two new reports on small business and individual audits, but said without defining what it means to be fair, the IRS could end up unknowingly playing favorites between different groups of taxpayers.
Piggybacking on the IRS’ targeting of tea party groups from 2010 through 2013, the new reports left Republicans on Capitol Hill miffed that the tax agency still hasn’t taken steps to make sure all taxpayers are treated the same.
“The American people deserve better. We must do more to ensure the IRS treats all Americans fairly, holds employees responsible for these abuses accountable and implements procedures to prevent this abuse from ever happening again,” said Rep. Peter J. Roskam, an Illinois Republican who helped lead one of the investigations into the IRS targeting.
GAO investigators said the IRS division that audits individuals’ returns gauges its performance by looking at whether it forces better compliance on taxpayers, but doesn’t measure itself on fairness or integrity.
“These audit goals do not refer to fairness and integrity because these terms have not been defined by IRS,” the investigators said.
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They added: “Existing performance measures focus on audit results rather than audit selection.”
The same held true for the IRS’ division that audits small businesses and the self-employed, where investigators said they held eight focus groups and employees weren’t able to settle on a single definition of what “fairness” meant when they were handling audits.
Some agency employees said it meant ignoring a taxpayer’s name or location; others said fairness included accounting for the different costs of living depending on where taxpayers lived. The investigators said those definitions could be mutually exclusive — creating even more confusion in what it meant to be fair to taxpayers, and leaving some treated differently than others.
“Without a clear definition of fairness that has been communicated to staff, [the division] has less assurance that its staff consistently treat all taxpayers fairly,” the investigators said.
Agency employees are judged on whether they’re fair to taxpayers, but the GAO said that’s impossible to gauge when the IRS doesn’t define what fairness means in the first place.
In its official response to the report, the IRS said it demands fairness in its mission statement, but declined the GAO’s suggestion that the agency come up with a firm definition of what that means.
“We believe the current audit selection process, existing internal controls and enhancement planned for implementation in 2016 provide more than reasonable assurance that audit selections are fair and are made with integrity,” John M. Dalrymple, deputy commissioner for services and enforcement, wrote back to investigators.
He said the division that handles audits of individual taxpayers takes fairness into account both as a unit and in each employee’s decision-making, saying the goal is to pick returns they think raise the most red flags, and by targeting them, they make sure taxpayers are paying their fair share.
Mr. Dalrymple also said the IRS tries to abide by its own taxpayer bill of rights that the agency has adopted.
The new reports came a day after a federal judge in Ohio certified a class-action lawsuit against the IRS by hundreds of tea party groups who said they were singled out for intrusive treatment, which violated their First Amendment rights.
IRS officials had insisted the targeting was the result of confused employees, not a systematic effort to deprive conservative groups of nonprofit status. But Judge Susan J. Dlott’s order Tuesday gives the tea party groups a chance to continue their case.
The fallout from that targeting still dogs the IRS nearly three years after the agency acknowledged the behavior.
Some groups are still awaiting approval, and Republicans in Congress say they still see signs the tax agency hasn’t learned its lessons.
Just last week the IRS abandoned a plan to ask nonprofits to provide Social Security numbers for all of their donors who contribute more than $250 in a year.
The IRS said the goal was to link the charitable donations with the numbers so taxpayers and the tax agency could more easily verify that returns claimed the correct dollar figure. But many nonprofits balked, saying they felt it would be intrusive to demand patrons’ Social Security numbers.
Republicans have punished the IRS with budget cuts in recent years — though they relented in December, approving a boost to be spent on improving customer service. But one of the strings attached to the funding is that the IRS is forbidden from targeting taxpayers for their political beliefs.
House Committee on Ways and Means Chairman Kevin Brady, Texas Republican, said the new GAO reports suggested “Americans remain at risk of political targeting.”
• Stephen Dinan can be reached at sdinan@washingtontimes.com.
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