A new internal audit has revealed that taxpayers’ rights have been abused nationwide because the IRS has routinely measured the performance of employees on the basis of how much money they collected, the agency announced Tuesday.
Last month, the IRS reported that a preliminary review had uncovered such improper practices at one of the agency’s 33 districts. The new audit confirmed that the same practices were prevalent in 11 other districts from coast to coast.
The chief problem, the audit concluded, was basing evaluations of managers and executives in the tax offices largely on statistical enforcement goals and not on the services they provided taxpayers. The audit said such an environment “places taxpayer rights at risk in the collection process.”
About one-quarter of the revenue officers and managers who were interviewed told the auditors that they felt pressure to meet enforcement goals and take enforcement actions.
The tax law specifically prohibits the use of enforcement goals and quotas by tax collectors.
“This report demonstrates that the agency has failed to strike the proper balance between providing customer services and fair enforcement of the tax law,” said Charles Rossotti, the commissioner of the agency, who took office in November with a promise to put the tax agency’s house in order.
The agency began to review its practices after public hearings last fall before the Senate Finance Committee uncovered widespread anecdotal evidence of taxpayers’ being mistreated by the IRS.
In March, the agency plans to report the results of another audit dealing with procedures that revenue agents follow when property is seized.
Rossotti has begun to make changes. Last month, he ended the practice of ranking the 33 tax districts on the basis of how closely they met their goal of tax collections. He also changed the way decisions were made about seizing property and began making the agency more accessible to taxpayers with problems and questions.
On Tuesday, the tax commissioner announced several other measures. He said, for instance, that he would establish a panel to see whether disciplinary action should be taken against officials because of abuses turned up by the audits. He also ordered rewritten an in-house guide for tax collectors that the auditors said emphasized productivity over customer service.
Treasury Secretary Robert Rubin, who has jurisdiction over the IRS, issued a statement Tuesday saying these changes were “a step in the right direction.”
Rubin said that he was “deeply troubled” and that the audit had revealed “an unacceptable situation that must and will change.”
Republicans in Congress hope to gain politically from the issue of IRS abuses. Many who want to replace the progressive income tax with another form of taxation, like a flat tax or a national sales tax, say that disclosures of missteps by the agency lend weight to their cause. Some Republicans say they want to abolish the tax service altogether.