Treasury Inspector General for Tax Administration
February 18, 2014
TIGTA - 2014-02
Contact: David Barnes
WASHINGTON – The Internal Revenue Service (IRS) has established guidance and procedures to inform its senior executives and managers when overnight long-term travel reimbursements are subject to employment taxes, yet some IRS executives appear to have incorrectly classified their travel as non-taxable. That is the conclusion of a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).
TIGTA reviewed whether the IRS has established guidance and procedures so that executives know when overnight long-term travel is subject to tax. The review was conducted as a follow up to a previous TIGTA report. In July 2013, TIGTA reported the IRS spent $9 million on executive travel in Fiscal Year (FY) 2011 and FY 2012 combined and that a small number of IRS executives had extremely high travel expenses compared to other executives.
The new report found that the IRS established adequate guidance defining the circumstances in which travel is taxable. Further, while the IRS had instituted a quarterly review process to identify potential long-term taxable travel, the criteria used could be improved and the IRS has not documented the procedures for conducting the travel reviews.
TIGTA reviewed the travel records for a sample of 31 executives and found that the tax classification of nine executives appeared to be incorrect based on their travel patterns and the IRS’s validation that the travel was taxable. Additionally, TIGTA identified three executives for whom the tax classification was untimely.
“Without an effective periodic assessment and management review of the executives’ travel activities, the IRS cannot ensure that its executives’ travel reimbursements are properly classified,” said J. Russell George, Treasury Inspector General for Tax Administration.
TIGTA recommended that the IRS Chief Financial Officer (CFO) modify and document procedures for conducting periodic reviews to determine whether employees and managers accurately determine and report the taxability of long-term travel. Furthermore, the CFO should issue an annual reminder to IRS employees of the policies and procedures related to long-term taxable travel status. IRS management agreed with TIGTA’s recommendations and stated that they plan to take appropriate corrective actions.
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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