Treasury Inspector General for Tax Administration
February 2, 2012
TIGTA - 2012-3
Contact: David Barnes
WASHINGTON -- The Internal Revenue Service (IRS) does not have effective internal controls to ensure defendants convicted of tax-related crimes comply with conditions of probation and restitution, according to a new report released publicly today by the Treasury Inspector General for Tax Administration (TIGTA).
When a defendant pleads guilty or is found guilty of a tax-related crime, the terms of a defendant’s sentence can include various combinations of imprisonment, probation, and monetary penalties such as fines and restitution. Probation and restitution act to discourage similar criminal violations by others.
However, the perception has grown that many defendants, despite being convicted of violating the tax laws, are escaping all responsibility for the payment of the taxes associated with the offenses they committed. The overall objective of this review was to determine whether defendants convicted of tax-related crimes are held responsible for the payment of the taxes associated with the offenses they committed.
TIGTA found that the IRS’s inability to properly account for restitution payments resulted in the issuance of erroneous refunds to three defendants and 16 taxpayers totaling approximately $543,000. In addition, the IRS’s systems for monitoring defendants’ compliance with the conditions of probation and restitution are neither effective nor reliable.
TIGTA’s analysis of data used to monitor defendants identified inaccurate tax account data totaling approximately $330,000 for 25 defendants. TIGTA also determined that Criminal Investigation (CI) inconsistently used the refund offset procedure to collect restitution payments. Finally, the IRS was not always granted restitution by the courts in cases where it appeared to be warranted.
“If the IRS does not collect the restitution that it is owed by criminals who have been convicted of tax-related crimes, justice has not been served,” said J. Russell George, Treasury Inspector General for Tax Administration. “All efforts must be made to collect on the funds due to the American people.”
TIGTA made several recommendations to the Chief of CI to address internal control weaknesses regarding accurate accounting for restitution payments, including preventing the issuance of erroneous refunds. In addition, TIGTA recommended establishment of a single database for monitoring defendants, revising guidelines for earlier notification to CI of the status of convicted individuals’ adherence to conditions of probation and restitution, and obtaining the IRS Office of Chief Counsel’s opinion on the use of refund offsets. Finally, TIGTA recommended that CI document in its investigative files why restitution was not included in sentences to identify factors that hinder the IRS being granted restitution.
In their response to the report, IRS officials agreed with the recommendations and stated that corrective actions are planned or have already been taken to address them.
Read the report.
Note: The difference between the date TIGTA issues an audit report to the Internal Revenue Service and the date TIGTA publicly releases the report is due to TIGTA's internal review process to ensure that public release is in compliance with Federal confidentiality laws.
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