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Tax Blawg

Tax Talk for Tax Pros

Introduction

Welcome to TaxBlawg, a resource for news and analysis of current legal issues facing tax practitioners. Although blawg.com identifies nearly 1,400 active “blawgs,” including 20+ blawgs related to taxation and estate planning, the needs of tax professionals have received surprisingly little attention. The Wall Street Journal's Tax Blog gives “tips and advice for filers,” and Paul Caron’s legendary TaxProf Blog is an excellent clearinghouse for academic and policy-oriented news. Yet, tax practitioners still lack a dedicated resource to call their own. For those intrepid souls, we offer TaxBlawg, a forum of tax talk for tax pros.

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Who Audits TIGTA?

The Inspector General for Tax Administration, TIGTA, has been in the news a lot lately. In addition to tracking down misbehaving IRS employees and misbehaving representatives, an important role of this organization seems to be examining every aspect of the operation of the Internal Revenue Service and publishing a critical report about it. Lately, it seems that TIGTA has been publishing an average of two a week, virtually all of which have been critical of the performance of the Internal Revenue Service. Two recent ones, however, deserves some close examination and cause this writer to wonder if TIGTA may not be crossing the line of objectivity.

The first alleges that the IRS is not properly pursuing return preparers who have made mistakes in preparing returns where the earned income tax credit (EITC) has been claimed. Anyone familiar with the EITC knows there are several reasons why this criticism rings hollow. The first is a dirty little secret: EITC is an acronym for “welfare,” and has no place in the Internal Revenue Code. If our executive and legislative branches had any courage at all, they never would have put it there, but they recognize that parts of the American public view welfare as a “four letter word,” so it’s been tucked away in the Internal Revenue Code and dumped on the IRS to administer.

The second reason is well known to anyone who has attempted to navigate the labyrinth of rules relating to the application of the law and eligibility for this credit. It is like a scene out of an old Marks Brothers movie. A well-meaning and professional as most TIGTA agents I have come to know are, I would defy any of them to pass an EITC exam—applying it to several fact situations—without making an error.

The third point very simply is that the IRS does not set its own budget, but rather Congress does, and Congress has simply not allotted enough funds for each and every one of the functions that TIGTA doesn’t seem to think the IRS is doing well enough. The ideal solution—removing the EITC from the Internal Revenue Code, and charging some other agency with properly administering it, seems lost upon TIGTA, and as noted above seems to be an example of criticizing an already overburdened and embattled agency.

The other recent study was to the effect that the IRS is misinterpreting the law in such a manner that it “misses” penalties that should be applied to erroneous refund claims, tax returns, and other matters. Anyone who has represented people before the Internal Revenue Service or prepared returns will find this a mindboggling announcement in light of the fact that penalties seem to be applied during audits for little more than that sake of applying penalties, and unfortunately, judicial opinions about whether the penalty should have been applied in the first place often cannot be reconciled with one another when similar facts appear to be present. The reality exists that many of the penalties are not sustained, and TIGTA does not seem to take that element of the process into account.

Hopefully, TIGTA has not interpreted its role to be critic in residence rather than a source of constructive solutions for addressing the problems which exist in the IRS. It plays an indispensable role as monitor of the IRS, but perhaps it’s falling short when it omits important elements from its reports.

 

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    George Connelly is recognized as one of the leading federal tax litigators in the United States.  His practice focuses on IRS audit, collection and criminal matters including civil and criminal tax litigation matters, for clients ...