Promote the Economy, Efficiency,
and Effectiveness
of Tax Administration
TIGTA’s
Office of Audit (OA) strives to promote the economy, efficiency, and
effectiveness of tax administration.
TIGTA provides recommendations to improve IRS systems and operations
while ensuring fair and equitable treatment of taxpayers. TIGTA’s comprehensive, independent
performance and financial audits of IRS programs and operations primarily
address mandated reviews and high-risk challenges facing the IRS.
Each year, TIGTA
identifies and addresses the major management challenges facing the IRS. TIGTA places audit emphasis on statutory coverage
required by RRA 98, and areas of concern to Congress, the Secretary of the
Treasury, the Commissioner of Internal Revenue, and other key stakeholders.
The IRS’
implementation of audit recommendations results in cost savings and increased
or protected revenue, reduction of taxpayer burden, and protection of taxpayer
rights and entitlements, taxpayer privacy and security, and IRS resources.
The following summaries highlight
significant audits completed in each of the above areas of emphasis during this
six-month reporting period.
Systems Modernization of
the IRS
The Business
Systems Modernization program is a complex effort to modernize IRS technology
and related business processes. Modernizing the IRS’ technology has been an ongoing
challenge. According to the IRS,
this effort involves integrating thousands of hardware and software components
while replacing outdated technology and maintaining the current tax
system. The
IRS’ goal of providing high-quality, efficient, and responsive information services
to its operating divisions is heavily dependent on modernizing its core
computer business systems while maintaining the existing systems. It also relies on the security of those
systems, the buildings that house them, and the safety of the people who
operate them.
Aging
Computer Hardware
The
IRS estimates that it should spend $180
million annually to adequately maintain and replenish its computer
hardware, and has initiated several actions to
address the risks associated with the aging computer hardware. However, the
information used to estimate the size and effect of the aging computer hardware
could be improved. The IRS
established a goal to obtain increased resources to address the aging computer
hardware as one of its highest priorities, but permanent program funding
remains uncertain and a disciplined investment management governance process is
needed for all infrastructure initiatives and activities. As a result, the IRS might not fund the
highest priority projects to ensure that investment decisions result in the
most efficient use of available resources on behalf of taxpayers.
The IRS
continues to emphasize that the core of tax administration processing relies
heavily on critical systems designed in the 1960s. Because of the inherent limitations of these
systems, the IRS’ ability to accomplish its mission and provide better service
to taxpayers is hindered. The IRS also
reports that the risk to tax administration is significant, because critical
business systems are currently operating on aged computer hardware (i.e.,
hardware that has exceeded its useful life). At
the beginning of FY 2006, the aged hardware was estimated to be valued at $276
million, with an additional
$161 million in hardware becoming aged during the same fiscal year.
TIGTA
recommended that the IRS:
1) implement procedures to improve inventory
data accuracy and completeness, and periodically prepare an updated aged
computer hardware estimate;
2) improve the integration of asset/inventory
management with incident and problem management;
3) permanently allocate necessary funds to
maintain and replenish the aging hardware;
4) ensure that End of Life Replacement
activity is included in the governance process; and
5) establish a process for monitoring and
reporting Sustaining Infrastructure Program accomplishments to address the
aging computer hardware issue.
IRS management agreed
with four of these five recommendations and stated that it planned to take
appropriate corrective actions. The IRS
did not agree to permanently allocate the necessary funds within its budget to
maintain and replenish the aging computer hardware, but agreed to realign the
base budget whenever appropriate, subject to availability. TIGTA disagrees with the IRS’s decision and believes it
should honor the commitment made to the IRS Oversight Board that the
current $45 million being spent on infrastructure would be augmented by
reallocating an additional $45 million from program efficiencies in Fiscal
Years 2006 through 2008.
TIGTA Report Reference No. 2008-20-002
The
Account Management Services Project
The IRS is
continuing to modernize its databases to provide immediate access to account
data, enable real-time transaction processing, and ensure daily account
settlement to improve customer service and business results. The Account Management Services (AMS) project
was initiated in May 2006 and has been chartered to address these needs. The project’s objective is to provide an
integrated approach to view, access, update, and manage taxpayer accounts. This is accomplished by providing IRS
employees with the tools to access information quickly and accurately in
response to complex customer inquiries and to update taxpayer accounts on
demand.
Reviews of the initial AMS releases
showed that the project team successfully implemented project management
processes and activities, which included project justification, contract, risk,
configuration, performance, and transition management.
The AMS Project Management Plan defines
the project, the scope of work to be performed, and the planned methodology for
managing project activities. The plan
also identifies the capabilities that AMS Release One must implement for it to
be considered complete. The AMS project
team successfully planned work schedules, identified and addressed potential
risks to project development, and coordinated with appropriate staff to implement
initial release capabilities. Although
the AMS project team is on schedule to make the proposed processing
capabilities available, its implementation is dependent on the IRS’s
Modernization and Information Technology Services organization’s abilities to
integrate these project capabilities into taxpayer account processing.
As a result of the
AMS project team’s effective implementation of the project management
practices, TIGTA did not make any recommendations. In
response to the draft report, IRS management noted the comments and
observations, acknowledging the successful implementation of the project
management processes for the AMS Release One.
TIGTA Report Reference No. 2008-20-053
Tax Compliance
Initiatives
Tax compliance
initiatives include administering tax regulations, collecting the correct
amount of tax for businesses and individuals, and overseeing tax-exempt and
government entities for compliance.
While increasing voluntary compliance and reducing the tax gap are
currently the focus of IRS initiatives, the IRS is facing significant
challenges in obtaining more complete and timely data and developing the
methods necessary for interpreting the data.
It must continue to seek accurate measures for the various components of
the tax gap and the effectiveness of the actions taken to reduce the gap. Broader strategies and better research are
needed to determine what actions are most effective in addressing
noncompliance.
Unreported
Self-Employment Taxes
According to the Government
Accountability Office, outlays from the main trust funds of the Social Security
and Medicare programs are projected to exceed revenues in the next decade. As the tax collector for these programs, the
IRS must ensure that self-employed taxpayers meet their tax responsibilities by
assessing and collecting the proper amount of self-employment taxes. Self-employment tax is estimated to make up
about $39 billion (72 percent) of underreported employment taxes, or 11 percent
of the total gross tax gap, making it one of the largest components of the tax
gap.
Unreported
Self-Employment Taxes
According to the Government
Accountability Office, outlays from the main trust funds of the Social Security
and Medicare programs are projected to exceed revenues in the next decade. As the tax collector for these programs, the
IRS must ensure that self-employed taxpayers meet their tax responsibilities by
assessing and collecting the proper amount of self-employment taxes. Self-employment tax is estimated to make up
about $39 billion (72 percent) of underreported employment taxes, or 11 percent
of the total gross tax gap, making it one of the largest components of the tax
gap.
TIGTA’s review of self-employment tax
found that IRS procedures were inconsistent for
identifying U.S Individual Income Tax Returns (Form 1040) reporting income on
line
21 that are potentially subject to the
self-employment tax.
Also, there was a significant problem with assigning an audit code to
returns with potentially unreported self-employment taxes. The code was either improperly assigned when
a return had no self-employment tax issue, or was not assigned when a
self-employment tax issue was present.
Overall, 25 percent of the returns sampled by
TIGTA had potential self-employment tax issues, but were either not selected
for audit or were surveyed (i.e., the audits were closed with little or no examination of
the returns by the IRS Examination function), even though the taxpayers
had not properly reported self-employment tax.
Approximately 43 percent of these returns had refunds available to
offset all or part of the self-employment tax liabilities.
TIGTA recommended that the
IRS:
1) emphasize the importance of assigning the
correct processing code to returns with potential self-employment tax
liabilities and provide additional training to tax examiners to improve the
review of income reported on Form 1040, line 21;
2) strengthen the processes for reviewing
returns upon receipt for potential unpaid self-employment taxes, especially the
processes for including the statutory income indicator in the Wage and Tax
Statement (Form W-2) database and for assigning an audit code when a
self-employment tax issue is present; and
3) reconsider the decision to cancel its corrective
action to address TIGTA’s previous recommendation that it immediately work
significant unreported
self-employment tax cases that have refunds pending, but no
response – or an inadequate response – to any letter issued by the IRS.
IRS management agreed with
the first two recommendations and, as noted, disagreed with the third. The IRS planned to explore the possibility of
expanding existing returns processing training material issued in January 2008. However, IRS management stated that the parameters could not be accurately
identified to ensure that it would not be withholding the refunds of taxpayers
who were not subject to self-employment taxes.
Based on the findings of this and previous
audits, TIGTA maintained that it was feasible for the IRS to begin examining
the returns of taxpayers who appear to owe a significant amount of
self-employment tax, have an available refund, and have not responded to
contact letters from the IRS. TIGTA
encouraged the IRS to move in that direction.
TIGTA Report Reference No. 2008-30-001
Return
Delinquency Cases and Unfiled Returns
In
Calendar Year 2006, the IRS reported that it issued more than 1.6 million
return delinquency notices to business taxpayers who had not filed required tax
returns by the return due date. TIGTA
determined that some IRS operational internal controls had been effectively
established. However, some of the return delinquency cases
reviewed were not resolved accurately and in a timely manner, and the IRS
needed to improve its computer program to identify business taxpayers who might
be liable for employment taxes.
TIGTA’s
recommendations included that the IRS:
1)
ensure that its reviews to assess team managers’ practices in performing
technical case reviews be completed quarterly; and
2)
revise procedures to require full compliance checks for delinquent
employment tax returns of “in business”
employers
IRS management
agreed with all of the report recommendations and has taken or agreed to take
corrective actions.
TIGTA Report Reference No. 2008-30-027
Security of the IRS
Millions of taxpayers entrust the IRS with sensitive financial and
personal data stored and processed by its computer systems. Recent reports of identity theft from both the
private and public sectors have heightened awareness of the need to protect
this data. The risks that sensitive data
could be compromised and that computer operations could be disrupted continue
to increase. These risks are due to
internal factors, such as the increased connectivity of computer systems, the
increased use of laptop computers, and external factors, such as the volatile
threat environment resulting from increased terrorist and hacker activity.
To maintain adequate security of sensitive taxpayer data,
the IRS must implement controls at all levels of its computer environment to
guard against external intruders as well as malicious employees and contractors
who have been given access to IRS systems to carry out their responsibilities. For example, controls are needed at the
perimeter to keep unauthorized persons from intruding into IRS systems, the
network architecture used to transmit data back and forth, and the applications
and databases used to store taxpayer data.
Network Security
Because the IRS sends sensitive taxpayer and administrative information
across its networks, network routers and switches must have sufficient security
controls to deter and detect unauthorized use.
Access controls for IRS routers were not adequate, and reviews to
monitor security configuration changes were not conducted to identify
inappropriate use. A disgruntled employee, contractor, or hacker could
reconfigure routers and switches to disrupt computer operations and steal
taxpayer information in a number of ways, including diverting information to
unauthorized systems.
The IRS had
authorized 374 accounts for employees and contractors to access routers and
switches in performing system administration duties. Of these, 141 (38 percent) did not have proper access
authorization. Authorizations for 86 of
the 141 employee and contractor accounts had been provided at some point in
time, but the authorizations had expired at the time of our review. However, TIGTA could not find router access
authorizations for the other 55 employee and contractor accounts. Of particular concern was that 27 of the
55 employees and contractors had accessed the routers and switches to change
security configurations.
To authenticate
users, the IRS employs a security application that requires users to enter an
account name and password. TIGTA found
that users circumvented this control by setting up 34 unauthorized accounts,
which appeared to be shared-user accounts.
Any person who knew the password to these accounts could have changed
configurations without accountability and with little chance of detection. For this reason, the IRS requires that shared
accounts be used only on a limited basis and that they be subjected to special
authorization controls. However, during
FY 2007, 4.4 million (over 84 percent) of the
5.2 million accesses to the routers were made by the 34 user accounts. Audit trail reviews necessary to detect
security events were also not being conducted.
TIGTA recommended that the IRS:
1) clarify responsibilities for providing
authorizations for employees and contractors to access the sensitive network
components;
2) eliminate unnecessary shared accounts;
3) improve the testing of authentication
controls to identify configuration weaknesses; and
4) ensure that audit trails are reviewed to
detect unauthorized actions on the routers and switches.
The IRS agreed with the recommendations and is taking
corrective actions.
TIGTA Report
Reference No. 2008-20-071
Database
Security
The IRS stores
its taxpayer, financial, and other data in more than 2,100 databases. However, it continues to have recurring
information security weaknesses that make its databases susceptible to
penetration attacks. Due to the
sensitivity of these data, the IRS could be a target for malicious users who
are intent on committing identity theft and fraud.
High-risk
weaknesses continue to exist, and sufficient corrective actions have not been
taken. TIGTA scanned IRS networks and determined
that 11 percent of approximately 1,900 databases had one or more installation
accounts with a default or blank password.
A total of 369 installation accounts, including 26 containing powerful
database administrator privileges, had default or blank passwords.
Databases found
with default or blank passwords during our scans included those that contained
personally identifiable tax information.
Malicious users could exploit accounts with default or blank passwords
to steal taxpayer identities and carry out fraud schemes.
TIGTA made
several recommendations, including ensuring that security training is provided
to employees with key security responsibilities and improving the process for
identifying and correcting accounts with blank or default passwords by
expanding the scanning criteria. IRS
management agreed with all of the recommendations in the report and plans to
take appropriate corrective actions.
TIGTA Report Reference No. 2008-20-029
Homeland
Security Presidential Directive-12
The total estimated cost to build and
maintain a Homeland Security Presidential
Directive-12 (HSPD-12) system for the Department of the Treasury is $421
million over 14 years. As the lead
bureau for the Treasury Department, the IRS is charged with ensuring that the
funds are spent prudently. The IRS
estimated it had obligated
$30 million as of June 2007.
The IRS did not administer contracts
effectively and could not provide documentation to support the actual costs
charged to the HSPD-12 program. The
Program Management Office did not effectively manage the contracts for the
HSPD-12 program. Statements of work were
too general to hold contractors accountable for work performed, and the IRS
paid contractors without verifying that work was performed. The IRS could not provide supporting
documentation for the actual costs spent on the program, and TIGTA found that
at least $3.5 million had been spent on unneeded hardware, software and
services.
In addition, the IRS did not follow its
established governance procedures for overseeing the HSPD-12 program because it
did not prepare a formal business case for the program. An internal business case was prepared by the
Program Management Office, but it did not comply with IRS business case
requirements, and it was never provided to the Treasury HSPD-12 governance
committees overseeing the program.
Additionally, program management made statements to Treasury Department
and IRS officials that were inaccurate.
As a result, the governance committees did not have sufficient
information with which to make critical management decisions for the program.
TIGTA
recommended that the IRS require
that future task orders prepared by the
HSPD-12 Program Management Office separate tasks by function, and that the
Program Manager maintain documentation sufficient to support all HSPD-12
program costs and assign costs to specific task orders. TIGTA also recommended that the IRS coordinate
with the Treasury Department to evaluate the possibility of combining its
Public Key Infrastructure efforts with those of the General Services
Administration. The IRS should also
ensure that executive steering committees responsible for providing oversight
to information technology projects enforce the use of IRS Enterprise Life Cycle
requirements.
IRS management
agreed with the recommendations and plans to take several steps to improve
management of the HSPD-12 Program Management Office.
TIGTA Report Reference No. 2008-20-030
Providing Quality
Taxpayer Service Operations
Since the 1990s,
the IRS has increased its delivery of quality customer service to
taxpayers. In its current strategic
plan, the IRS’s first goal is to improve taxpayer service. However, since the late 1990s, the IRS has
gradually allocated more resources to the collection, examination, and criminal
investigation functions and fewer resources to taxpayer service functions. As a result of this resource shift and other
factors, in July 2005, Congress requested that the IRS develop a five-year plan
that would include an outline of which services the IRS should provide and how
it would improve services for taxpayers.
In response, the IRS developed the Taxpayer Assistance Blueprint to help
it focus on providing the appropriate types and amounts of service. However, the IRS is already facing challenges
with the Blueprint. As it moves forward,
inaccuracies and inconsistencies will put the Blueprint at risk of improperly
aligning service content, delivery, and resources with taxpayer and partner
expectations.
Carryback
Loss Claims
When taxpayers
have significant losses from business activities or natural disasters, their
deductions may exceed their income for the tax year, resulting in a net
operating loss. Taxpayers can file claims to apply (or to carry back) these
losses to income in prior years, which result in refunds of taxes previously
paid. The IRS processed 60,865
individual carryback loss refunds totaling approximately $1.2 billion in FY
2007.
The IRS has
processes to review these claims.
However, it does not always identify and correct the errors before the
claims are processed and the refunds are paid.
TIGTA reviewed a statistical sample of 84 carryback loss refund claims
that posted to the IRS Master File between August 1, 2004, and July
30, 2005, and determined that 42 (50 percent) contained at least one
error. The IRS did not correct the
errors on 24 (57 percent) of the 42 claims, resulting in $732,941 in additional
refunds due to taxpayers and $1,126,501 in additional tax due to the IRS. The majority of the errors on the refund
claims fell into three common
categories: Alternative Minimum Tax (AMT), charitable
contributions deductions, and IRS changes to the originally filed loss year tax
return.
Unclear tax form instructions
and tax publications appeared to contribute to taxpayer errors. IRS procedures for working carryback claims
were also vague and open to interpretation.
Therefore, TIGTA recommended that the IRS revise the applicable
instructions for claiming the carryback loss as they related to the charitable
contributions deduction and the AMT.
TIGTA also recommended that the IRS change the instructions for Forms
1045 and 1040X as they pertained
to carryback losses, requiring taxpayers to attach the AMT form for each
carryback year.
TIGTA also
recommended that the IRS:
1) revise the procedures for working
carryback refunds to improve the identification and resolution of errors before
the refunds were paid;
2) change the procedures for verifying the
carryback claim to require employees to ensure that the AMT form is attached
for each carryback year; and
3) work to modify the Desktop Integration
tool for the alternative tax net operating loss deduction.
IRS management agreed with most of TIGTA’s recommendations and has taken
or agreed to take appropriate corrective actions. Management partially agreed with the
recommendation to revise the instructions for Forms 1045 and 1040X, and TIGTA
agreed that the planned corrective action was adequate. The IRS disagreed, however, with the
recommendations requiring taxpayers to attach the AMT form for each carryback
year and requiring that IRS employees ensure that the form is attached. The IRS indicated that requiring the taxpayer
to attach this form would impose an unreasonable burden and would likely be
viewed as a violation of the Paperwork Reduction Act of 1995. TIGTA believes that the only additional
taxpayer burden would be to attach a copy of the Form 6251 for each loss year
to the carryback claim. Taxpayers are
already required to complete the Form 6251, and they voluntarily included the
form on most of the claims filed.
TIGTA Report Reference No. 2008-40-062
Administration
of Taxes Used to Maintain the Nation’s Highways
The Heavy Highway
Vehicle Use Tax (Heavy Vehicle Use Tax) is a prepaid tax the IRS collects. Combined with other Federal excise taxes, it
is used to provide more than $1 billion annually in Federal highway
transit funds to the States.
The IRS recognizes the unique challenges
and complexity related to the Heavy Vehicle Use Tax and offers a number of
assistance options for taxpayers. The
Alternate Proof of Payment Program is based on an agreement between the IRS and
State Departments of Motor Vehicles that allows taxpayers to simultaneously
file, pay the Heavy Vehicle Use Tax, and register their vehicles. This program can reduce the risk of
noncompliance because the tax return and associated payment are provided at the
time of registration; however, it currently operates in only 11 States.
The IRS has
developed a process that enables Heavy Highway Vehicle Use Tax Return
(Form 2290) filers to electronically file their tax returns because of a law requiring taxpayers with 25 or
more vehicles to electronically file. As
of December 9, 2007, the IRS had received 1,569 electronically filed Forms
2290. Although electronic filing
benefits both taxpayers and the IRS, costs and unfamiliarity with this option
may be limiting participation.
TIGTA
recommended that the IRS:
1)
encourage
more State participation in the Alternate Proof of Payment Program;
2)
develop
a process to identify States participating in the program;
3)
ensure
that agreement provisions are followed; and
4)
promote
the benefits of electronic filing to all Form 2290 filers to increase
electronic filing participation.
IRS management
agreed with the recommendations and plans to take appropriate corrective
actions.
TIGTA Report Reference No. 2008-40-089
Complexity of the Tax
Law
Simplicity, transparency, and ease of administration are interrelated
and desirable features of a tax system. Over the years, the
Federal tax system, especially the Federal income tax, has become more complex,
less transparent, and subject to frequent revision. Tax complexity and frequent revisions to the
Internal Revenue Code make it more difficult and costly for taxpayers who want
to comply with the system’s requirements, and for the IRS to explain and
enforce the tax laws. Tax law complexity
results in higher costs for both tax administration and tax compliance. Simplification and reform have the potential
for reducing the tax gap by billions of dollars.
Individual
Retirement Accounts
As more
taxpayers reach retirement age, their incomes will be transitioning from wages
to investment and retirement benefits.
Individual Retirement Accounts (IRA) are a key,
tax-deferred way for individuals to save for retirement and are an increasingly
important way for individuals to roll over savings from pension plans. In 2005, estimated Roth IRA assets totaled
$147 billion, and traditional IRA assets totaled $3.26 trillion. TIGTA found that taxpayers are sometimes
contributing more than is allowed into tax-deferred or tax-free accounts, and
they are not taking taxable distributions when required, which could result in
lost tax revenues.
The IRS needs to
strengthen its procedures and controls for ensuring that taxpayers and IRA
custodians comply with IRA rules.
Failure to ensure correct reporting by IRA custodians could hinder the
IRS’s ability to identify excess contributions.
Moreover, lack of adequate monitoring and enforcement could result in
lost tax revenues when taxpayers make excess contributions or fail to pay
excise taxes on required minimum distributions that are not taken.
TIGTA
recommended that the IRS:
1)
conduct analyses for identifying and resolving erroneous IRA
Contribution Information (Form 5498);
2)
develop and implement strategies to bring noncompliant taxpayers back
into compliance;
3)
utilize information from the Forms 5498 to identify taxpayers who are
subject to required minimum distributions and compare this information to
subsequent tax returns to determine whether distributions were reported; and
4)
require IRA custodians to compute and provide to the IRS the estimated
required minimum distributions so this information could be used as part of the
Automated Underreporter Program.
The IRS agreed
with the recommendations and plans to take appropriate corrective actions.
TIGTA Report Reference No. 2008-40-087
(Sensitive But Unclassified)
Human Capital
The Federal
workforce is aging, and agencies are facing not only retirements and staff
turnover, but also the unique challenges of the 21st century. The IRS recognizes that it must be prepared
to respond to an increasing and more demanding population, a more global and
multilingual environment, and an increasing number of taxpayers who have
complex financial holdings, and the means and motives to resist paying their
taxes.
In addition, the IRS, along with other Federal agencies, is slowly
moving toward changing pay, classification, and performance management systems
to transition to a more market-based and performance-oriented culture.
Workers’
Compensation Program
The IRS cash
outlays for workers’ compensation claims continue to increase, driven by
factors such as cost of living increases and higher costs for medical
equipment, medications, and treatment.
These outlays represent financial obligations to care for injured
employees and can be considered a cost of doing business. However, if the costs are not properly
managed and increase significantly, obligations could ultimately affect the
amount of money the IRS has available for enhancing the delivery of service to
the taxpaying public.
TIGTA found that control processes needed
to be established to ensure that the IRS was not overpaying workers’
compensation benefits. TIGTA questioned
more than $1 million in charges that included benefits that were paid
subsequent to Social Security Administration records indicating claimants had
died.
In addition, TIGTA determined that steps
needed to be taken to ensure that required IRS-wide procedures were followed
when initiating claims and that a more strategically oriented approach needed
to be implemented for returning employees back to work following an
injury. A review of case files
associated with 40 claims found problems in
31 of the claim cases. Among other
things, TIGTA found that injury investigations were not thoroughly conducted
and some questionable claims were not challenged while others were improperly
challenged.
Increasing from $1.4 billion in 1990 to
nearly $2.4 billion in 2005, the rising costs of workers’ compensation has
caused concern throughout the Federal government. TIGTA analyzed practices implemented by
agencies that were particularly effective at controlling costs and returning
claimants to work. In contrast to these
practices, TIGTA found that the IRS return-to-work efforts were more reactive,
less strategically oriented, and heavily reliant on its first-line
managers. Moreover, specific policies
and procedures had yet to be implemented to coordinate and collaborate across
functional lines to assist in transitioning more employees back to the workplace.
TIGTA
recommended that the IRS:
1)
develop and implement control processes for reviewing the accuracy of
costs in chargeback reports;
2)
obtain evidence to support the claim that benefits are paid only to
current or former IRS employees; and
3)
seek reimbursement for the compensation paid subsequent to claimants’
deaths and on denied claims.
TIGTA also
recommended that the IRS implement a control to provide assurances that
required procedures are completed in the claims process, and establish a more
strategic approach to enhance return-to-work efforts.
IRS management
agreed with the recommendations and has taken or will be taking corrective
actions.
TIGTA Report Reference No. 2008-30-056
Taxpayer Protection and
Rights
Identity theft
is a growing national problem that increasingly affects tax
administration. Individuals who steal
taxpayer identities affect the tax system in two ways:
- Fraudulent Tax Returns – An
individual may use another person’s identity [name and Social Security
Number (SSN)] to file a fraudulent tax return in order to steal a tax
refund. Subsequently, the lawful
taxpayer would have to prove his or her identity to correct his or her tax
liability or refund.
- Misreporting of Income – An
individual may use another person’s name and SSN to obtain
employment. Because income earned
is reported to the IRS by the employer, it will appear to the IRS that the
lawful taxpayer did not report all of his or her income on his or her tax
return.
In October 1998,
the Identity Theft and Assumption Deterrence Act was enacted. It expanded the criminalization of fraud in
connection with identification documents to cover the unlawful transfer and use
of identity. The law defines identity theft
as when someone “…knowingly transfers or uses, without lawful authority, a
means of identification of another person with the intent to commit, or to aid
or abet, any unlawful activity that constitutes a violation of Federal law, or
that constitutes a felony under any applicable State or local law.”
Employment-Related
and Tax Fraud Identity Theft
The IRS has not placed sufficient
emphasis on employment-related and tax fraud identity theft. The IRS’s Criminal Investigation Division
investigates identity theft crimes only if they are committed in conjunction
with other criminal offenses having a large tax effect. As a result, the
IRS has mainly focused on combating identity theft through public
outreach. In addition, current processes
have been inadequate in reducing burden for taxpayers victimized by identity
theft. The IRS still lacks the
comprehensive data needed to determine the impact identity theft is having on
tax administration.
TIGTA recommended
that the IRS:
1)
develop
and implement a strategy to address employment-related and tax fraud identity
theft, including coordinating with other Federal agencies;
2)
update
the Automated Underreporter System to display prior year case closing codes on
the individual case screens and create identity theft closing codes for
multiple issue cases; and
3)
revise
Withholding Compliance function case selection criteria to incorporate special
handling of identity theft victims.
IRS management
generally agreed with all of the recommendations. The IRS is developing a five-year strategy
for the Privacy, Information Protection, and Data Security Office that will
include identity theft issues. However,
due to confidentiality and disclosure restrictions, management does not plan to
more actively identify or stop individuals from committing employment-related
identity theft or to notify employers of their employees’ actions. Management did, however, provide a copy of
TIGTA’s draft audit report to the Office of the Assistant Secretary of the
Treasury for Tax Policy to evaluate whether or not to seek a legislative
remedy.
In January 2008,
the IRS implemented the universal identity theft indicator to mark taxpayer
accounts when a taxpayer self‑identifies as an identity theft victim and
provides the proper documentation to verify his or her identity. This code enables the IRS to centrally track
identity theft incidents and eliminates the need to update the Automated
Underreporter System case screens and develop closing codes for multiple issue
cases. The IRS plans to develop business
rules for various programs to apply unique treatments to cases in which the
universal identity theft indicator is present.
TIGTA
acknowledges the IRS’s efforts to improve business processes to reduce the
burden on identity theft victims.
Effective use of the universal identity theft indicator should reduce
the number of multiple contacts made with taxpayers. However, TIGTA is still concerned about the
lack of action on employment-related identity theft cases and details in the
IRS’s response concerning the responsible officials and implementation dates
for some of its planned actions. In
addition, because the Federal Trade Commission Identity Theft Clearinghouse is
the sole national repository of consumer identity theft complaints, it should
be an important source of data for the IRS’s Criminal Investigation Division.
TIGTA Report Reference No. 2008-40-086
Protect the Integrity of Tax
Administration
TIGTA’s Office of
Investigations (OI) has a unique statutory mandate to protect the tax revenue
that funds the operations of our Federal government. TIGTA’s work touches every citizen of the United States
every day, because the revenue stream it protects provides for the health,
safety, welfare and common defense of every American.
TIGTA’s
statutory mandate is substantially broader than that of most Offices of
Inspector General. While all Offices of
Inspector General combat fraud, waste, and abuse, TIGTA is also statutorily
charged with protecting the integrity of Federal tax administration.
To
satisfy its broad mandate, TIGTA performs a variety of functions, including:
- Investigating
allegations of criminal violations that adversely impact Federal tax
administration;
- Investigating
allegations of serious administrative misconduct by IRS employees;
- Initiating
proactive work to detect criminal or administrative misconduct in the
administration of IRS programs;
- Working
closely with IRS employees, tax practitioners, and community groups to
educate them about indicators of integrity problems or fraud in IRS
programs;
- Operating
an aggressive Criminal Intelligence Program to proactively identify and
mitigate threats to IRS employees or to the continuity of IRS operations;
- Investigating
assaults and threats against IRS employees, facilities and operations;
- Working
proactively to identify and mitigate threats to IRS information systems;
- Protecting
the increasingly important electronic environment in which Federal tax
administration is conducted;
- Investigating
fraud, waste, and abuse involving IRS procurements and contracting;
- Maintaining
a national complaint center accessible by telephone or the Internet that
serves as the hub for receiving and addressing complaints of fraud, waste,
abuse and misconduct involving IRS employees, programs and operations;
- Maintaining
a robust forensic science program to analyze physical and digital evidence
gathered during investigations;
- Operating
the land mobile radio program on behalf of the Treasury Department and all
of its bureaus; and
- Employing
specialized technical and investigative equipment, training, and
techniques to enhance investigative outcomes.
TIGTA’s Investigative Performance Model
TIGTA has employed a progressive Performance Model to focus
investigative efforts on its three primary areas of investigative
responsibility: employee integrity; employee and infrastructure security; and
external attempts to corrupt Federal tax administration. Since its introduction, the Performance Model
has served both to focus TIGTA’s investigative activities and to demonstrate
the value of its investigations to external stakeholders.
Over time, the Performance Model has proven to be a far more powerful
management tool than initially anticipated.
Because the Performance Model focuses on TIGTA’s core mission-related
objectives, it has become an essential tool for gauging almost every aspect of
TIGTA’s investigative operations. The
use of performance measures adopted to track investigative activity under the
Performance Model helps quantify investigative productivity and produces
reliable statistical data to better inform budgetary planning, staffing
decisions and training needs.
The objective, measurable data derived by using the performance
measures:
- drives budget
planning within OI;
- helps identify
special agent training needs;
- aids in
detecting imbalances in the distribution of human capital resources by
analyzing the data produced; and
- assists in
making staffing decisions.
The Performance Model has become an indispensable management tool as the
growing body of data collected by using it has been analyzed and transformed
into information for making better strategic organizational decisions. Use of the Performance Model has shown that
TIGTA needs to focus more investigative resources on the electronic environment
in which Federal tax administration increasingly operates, and in which new
threats to IRS operations are rapidly emerging and known threats are
continually evolving.
During this reporting period, OI has substantially realigned its
existing human capital resources within the Strategic Enforcement Division
(SED) to combat the increasing volume of Internet-based scams and phishing
schemes that corrupt the integrity of online IRS programs and operations. By the end of the next reporting period, OI
will also have completed a rigorous training program for all special agents in
the area of investigating crimes in the electronic environment.
Employee Integrity
IRS employee misconduct affects all Americans because it undermines the
Federal revenue stream that provides for the health, safety, welfare and common
defense of the nation.
TIGTA takes its responsibility to preserve the integrity of Federal tax
administration very seriously. TIGTA
investigates such employee misconduct allegations such as extortion, bribery,
theft, abusive treatment of taxpayers, false statements, financial fraud, and
unauthorized access to confidential taxpayer information (UNAX). These investigations also include contractor
and tax practitioner misconduct and fraud.
Crimes committed by IRS employees within the IRS electronic environment
include diverting taxpayers’ returns by manipulating IRS information systems,
and manipulating IRS information so that an IRS employee or another person can
receive an inflated refund.
UNAX is a persistent vulnerability for the IRS and the Federal tax
system. The IRS is entrusted with
properly maintaining and safeguarding sensitive taxpayer information, including
personally identifiable information, the loss or misuse of which could result
in identity theft and other fraudulent activity. Because the Federal tax system is based on
voluntary compliance, public confidence that personal and financial information
given to the IRS for tax administration purposes will be kept confidential is
essential to that system. Even when an
unauthorized access does not involve unauthorized disclosure of taxpayer
information by an IRS employee, these cases undermine taxpayer confidence in
the tax administration system. TIGTA has
specific programs to protect the confidentiality, integrity, and availability
of this sensitive information.
To protect the privacy of taxpayer data, SED employs a variety
of audit trail and forensic data analysis tools to proactively identify
potential UNAX violators and to identify systemic problems or weaknesses. Once SED develops an investigative UNAX lead,
it is forwarded to the appropriate TIGTA field office for local
investigation. TIGTA’s
UNAX program investigates unauthorized access of the Integrated Data Retrieval
System by utilizing proactive and
reactive methods. Over the past 10 years, TIGTA special agents have investigated an average of
470 UNAX cases per year. Over half of those investigations are
proactively generated utilizing data mining techniques by TIGTA’s forensic data
analysts. Other investigations are
initiated because of complaints or allegations made by taxpayers or IRS
officials. Of the UNAX investigations
proactively generated by TIGTA, over 90 percent
result in substantiated UNAX violations.
The UNAX allegations that are investigated as a result of taxpayer or
IRS management complaints are fully investigated by leveraging the forensic data
analysts’ expertise. Of the UNAX
violations investigated this fiscal year, 30 percent have an affiliated
criminal violation in conjunction with the UNAX (e.g., identity theft, bribery,
or theft of government funds through improper adjustments of IRS accounts).
As the IRS continues its modernization efforts and expands its services
to taxpayers by developing new automated systems, TIGTA continues to stress the
importance of incorporating robust audit trail capabilities as an integral defense
against threats to the rapidly expanding IRS electronic environment. This electronic environment in which
sensitive taxpayer information is stored and flows will continue to expand
rapidly, and UNAX will pose an ever-increasing threat to the security of
taxpayer information. Although TIGTA
provided 1,251 fraud awareness presentations last year and the IRS annually trains all of its employees about UNAX,
there is no indication that UNAX violations will subside. In fact, UNAX will likely increase as the IRS
designs new systems that allow easier access to sensitive tax information for
improved response to taxpayer inquiries.
During this reporting period, TIGTA provided fraud awareness
presentations to more than 15,000 IRS employees. In addition, TIGTA completed 915 employee
integrity investigations, of which 247 were UNAX investigations. These investigations resulted in six criminal
prosecutions and 539 administrative disciplinary actions against IRS employees.
The
following cases are examples of IRS employee and contractor integrity
investigations that TIGTA conducted during this period:
Ten Indicted for Illegally Obtaining Confidential Tax Information
On December 5, 2007, ten people were indicted in the U. S. District Court,
Western District of Washington at Tacoma, for conspiracy,
wire fraud, and aggravated identity theft.
Six of the defendants were charged with solicitation of Federal tax
information.
According to court documents, defendants Emilio A. Torrella and Brandy
N. Torrella owned and operated BNT Investigations in Belfair, Washington,
which provided private investigative and background research services. BNT Investigations employed defendant Steven
W. Berwick as an office manager and researcher.
Allegedly, the Torrellas and their employees,
including
Mr. Berwick, telephoned State and Federal agencies, including the IRS, posing
as the individuals about whom they were seeking information. Through such fraudulent telephone calls, the
Torrellas and their employees obtained personal wage information, employment
histories, Social Security benefits information, Federal tax records, and
medication and hospitalization records.
Court
documents allege that from approximately January 2004 to May 2007, the
defendants conspired to obtain confidential tax, medical, and employment
information through false pretenses on about 12,000 individuals. To obtain this information, defendants
Victoria J. Tade, Megan M. Ososke, Robert Grieve, Ziad N. Sakhleh, Patrick A
Bombino, Esaun G. Pinto, Sr., and Darci P. Templeton, all private investigators
throughout the nation, submitted requests to the Torrellas and their employees,
including Berwick, to uncover confidential employment, financial, tax, or
medical information of individuals they were investigating on behalf of other
clients. When submitting these requests,
the private investigators provided the Torrellas with the subjects’ identifying
information such as full names, dates of birth, addresses, and Social Security
numbers. The individuals being
investigated were not aware that their identifying information was being
disseminated and used in this manner, nor did they give permission to anyone to
obtain the confidential information.
IRS
Employee Sentenced for Unauthorized Access of Computer Data
On December 20, 2007, Patricia Moreno was sentenced in the U. S.
District Court, Eastern District of California to one year of probation, 50
hours of community service, a $500 fine, and a $25 penalty assessment for
unauthorized access of computer data.
According to court documents, between approximately March 17, 2003, and
April 22, 2004, Ms. Moreno, in her capacity as a tax examining technician for
the IRS, exceeded her authorized access and obtained confidential information
contained in the IRS tax database.
Specifically, Ms. Moreno accessed the confidential tax records of an
individual on at least 85 different occasions.
Former IRS Employee Sentenced for
Unauthorized Inspection of Tax Returns and Return Information
Diane
Snyderman was sentenced on January 8, 2008, in the U.S. District Court of New
Jersey, to four years probation, six months of home confinement, a $10,000
fine, and a
$25 special assessment fee on one count of unauthorized inspection of tax
return information.
On August 9, 2007, Ms. Snyderman,
who was formerly employed by the IRS, pleaded guilty in the United States
District Court for the District of New Jersey, to the unauthorized inspection
of tax returns and return information.
According to court documents, an
investigation was initiated after SED established that on or about April 22,
2005, Ms. Snyderman inspected return information of an individual who was a
Certified Public Accountant (CPA) and who had prepared Ms. Snyderman’s tax
returns for the past 30 years. SED also
established that between about August 1997 and about September 2006, Ms.
Snyderman engaged in a variety of unauthorized activities and accesses that
were outside the scope of her duties.
According to court documents, Ms. Snyderman inspected tax returns and/or
return information for approximately
56 individuals who were all clients of her CPA.
Ms. Snyderman also inspected tax returns and return information relating
to a real estate sales firm listed on her IRS employment application as her
former employer, and tax returns and return information relating to her friends
and relatives, and her friends’ relatives.
IRS Employee Pleads Guilty to Unauthorized
Inspection of Tax Return Information
On December 19, 2007, Ericka Duson pleaded guilty in the U.S. District
Court for the Eastern District of California to unauthorized inspection of tax
return information.
According to court documents, between January 3, 2000, and January 24,
2004,
Ms. Duson, as an employee of the IRS, unlawfully and without authorization
accessed and inspected the tax return information of approximately 183 private
individuals.
Latitia Simmons Indicted on Theft and Forgery Charges
On December 20, 2007, Latitia Simmons was indicted in the Circuit Court
of the Eighteenth Judicial Circuit, DuPage
County, Illinois, on
theft and forgery charges.
According to court documents, between September 26, 2002, and September
12, 2006,
Ms. Simmons committed theft of United
States currency valued between $300 and
$10,000 that was the property of the IRS.
In addition, Simmons allegedly committed forgery with the intent to
defraud by knowingly delivering employee time reports to the IRS that were purported
to have been made by another individual.
Employee and
Infrastructure Security
Congress
recognized the importance of protecting the Federal Government’s ability to
collect tax revenue when it created TIGTA.
The agency accomplishes its statutory mandate to protect Federal revenue
collection by identifying and investigating threats to IRS employees, physical
infrastructure, and the electronic environment in which Federal revenue
collection largely occurs.
Assaults and
Threats against IRS Employees
TIGTA aggressively responds to assaults or threats
against IRS employees and submits information regarding dangerous taxpayers to
the IRS Office of Employee Protection, which administers the IRS Potentially
Dangerous Taxpayer Program.
The following case is an example of an
assault and threat investigation TIGTA conducted during this reporting period:
Lisa Blechman Arrested for Assaulting IRS
Employee
On November 14, 2007, TIGTA special agents
apprehended Lisa Blechman in response to an arrest warrant issued on November
13, 2007, by the United States District Court, Central District of
California. Ms. Blechman was arrested
for intentionally assaulting an employee of the IRS by unleashing two dogs
while the employee was performing her official duties.
According to court documents, on October 30, 2007, an IRS employee went
to
Ms. Blechman’s residence to serve an IRS summons. When the IRS employee identified herself, Ms.
Blechman became visibly agitated and began yelling and swearing at her. After the IRS employee taped the summons to
the front door, Ms. Blechman told the IRS employee that if she did not remove
the summons from the door, Ms. Blechman was going to come outside with her
dogs. As the IRS employee began to walk
to her vehicle,
Ms. Blechman opened the front door and let the dogs out in an attempt to scare
and intimidate the IRS employee.
Threats to
the IRS Electronic Environment
Crimes within
the IRS electronic environment include those committed by IRS employees and
those committed externally. Examples of
external crimes include refund theft and impersonation of IRS employees to
obtain personal information that is then used to divert a taxpayer’s refund or
to commit identity theft.
SED is staffed with
data analysts, computer specialists, and criminal investigators with the
technical expertise to monitor, probe and investigate in the evolving
electronic environment. Investigators
and computer programmers assigned to the System Intrusion Network Attack
Response Team (SINART) investigate attempts to interfere with the security,
integrity, and availability of IRS information systems by external
sources. They respond to computer
intrusion incidents, investigate IRS network vulnerabilities, and conduct system-wide
penetration tests. Agents assigned to
the Computer Investigative Support Program provide forensic analysis of
computers and other media to develop evidence in support of TIGTA
investigations. TIGTA has also
coordinated efforts with the IRS to protect taxpayer information within the IRS
electronic environment. The SINART
provides security assessments of the IRS network.
Igor Rodov Pleads Guilty to
Aiding and Abetting Commission of Wire Fraud
According to the U. S. Attorney for the District of
Connecticut, Igor Rodov, 31, a citizen of Belarus
residing in Connecticut, pleaded guilty on
Friday, February 29, 2008, before Senior
U. S. District Judge Ellen Bree Burns in New
Haven to one count of aiding and abetting the
commission of wire fraud.
According to documents filed with the U. S. Federal
Court and court statements, beginning in January 2006, and continuing until
November 2006, Mr. Rodov aided and abetted another individual engaged in a
scheme to defraud the U. S. Department of the Treasury and 120 individual
taxpayers of money by means of materially false and fraudulent
representation. The other individual was
able to obtain the personal information of the individual taxpayers, without
consent, including names, addresses, Social Security numbers, and wage
information. The individual then used
that personal information to file Federal income tax returns electronically for
those taxpayers using two Web sites.
Those filings were done without the consent of the taxpayers. The individual electronically signed each of
the filings and, in so doing, fraudulently represented that he was the
individual taxpayer named in the filings.
Mr. Rodov knowingly associated and participated in
this scheme to defraud by opening several bank accounts in his name with
several banks in Connecticut. Subsequently, the fraudulently obtained tax
refunds were deposited into the bank accounts opened and maintained by Mr.
Rodov. Mr. Rodov faces a maximum term of
imprisonment of 20 years and a fine of up to $250,000.
External Attempts to
Corrupt Tax Administration
TIGTA has a
statutory obligation to investigate external attempts to corrupt or impede the
administration of internal revenue laws.
Such attempts include:
·
Taxpayers
offering bribes to IRS employees to reduce their tax liabilities;
·
The
use of fraudulent IRS documentation to advance criminal activity;
·
Impersonation
of IRS officials (in person, telephonically, or via the Internet); and
·
Corruption
of IRS programs or operations through procurement or contractor fraud.
The increasing
reliance on electronic communications and the need to maintain a safe
electronic operating environment for the huge task of collecting the nation’s
revenue present a tremendous challenge to the IRS.
TIGTA is
particularly concerned about phishing schemes that rely on e-mail messages
falsely purporting to relate to legitimate IRS operations. Some of the messages claim to be from the
IRS; others purport to be from legitimate businesses seeking to assist
taxpayers in dealing with the IRS. These
messages have one thing in common: they
solicit personally identifiable information such as Social Security numbers and
banking information, which is then used to commit identity fraud. Some tell the recipient that the IRS wants to
reward them for having filed early, and their personal and banking information
is needed to electronically deposit the money.
These schemes also take the form of telephone calls to taxpayers, often
from untraceable pre-paid cell phones, notifying the taxpayer of a refund and
requesting personal information in order to expedite the deposit
electronically.
During this
reporting period, the IRS reported 1,176 phishing incidents. TIGTA continues its efforts to educate the
public about these abusive schemes and to ensure that misuse of the IRS name,
impersonation of an IRS employee, and identity theft incidents are minimized.
The following cases are examples of
external attempts to corrupt Federal tax administration that TIGTA conducted
during this period:
Wilfredo
Ventura Sentenced for Bribery of IRS Agent
On December 17, 2007, Wilfredo
Ventura was sentenced in the U. S. District Court, Southern District of Texas,
to 21 months of imprisonment, three years of supervised release following
imprisonment, and a $100 criminal monetary penalty for bribery of a public
official.
According to court documents, on
or about October 16, 2006, Mr. Ventura knowingly offered $500 to an IRS revenue
agent, with the intent to influence the agent to aid in committing a fraud
against the United States,
in violation of the agent’s lawful duty as a public official.
Civil Complaint Filed Against Keith O’Brien Slade
and Controlled Quality Corporation for Approximately $499,782 in False Claims
Against IRS
On October 31, 2007, a civil
complaint was filed by the U. S. Attorney’s Office in the
U. S. District Court, District of Columbia, against the Controlled Quality
Corporation, a defunct company formerly doing business in the District of
Columbia, and its owner,
Keith O’Brien Slade, to recover triple damages and civil penalties under the
False Claims Act, 31 U.S.C. §§ 3729-3733.
According to court documents,
from approximately June 2001 to February 2004, the defendants had a contract
with the Government Printing Office (GPO) to provide printing services. The defendants entered into a contractual
agreement with the GPO beginning June 9, 2001, whereby the defendants agreed to
prepare and duplicate various documents for GPO customer agencies. The IRS was one of those customer
agencies. During the contract period,
the defendants were found to be using a subcontractor to perform 100 percent of
the printing services awarded to the defendants by the GPO. The defendants then prepared and certified
vouchers for payment attesting that they alone prepared and performed the
work. These invoices also contained
inflated prices used in the production of the printed work for the IRS. The IRS made at least 28 procurements from
the defendants; the total amount the IRS paid to the defendants was
approximately $499,782, while the defendants paid the subcontractor a sum of
approximately $61,678.
Ruth Fallis Sentenced to Three Years of
Incarceration and Restitution in Amount of $803,192 to IRS
On October 30, 2007, Ruth Fallis was
sentenced in the U. S. District Court for the District of Delaware to 36 months
of incarceration, three years of supervised release following imprisonment,
restitution in the amount of $803,192 to the IRS and $258,534 to an individual,
and a special assessment of $200. Ms.
Fallis was sentenced after pleading guilty on March 26, 2007, to bank fraud and
wire fraud.
According to court documents,
between approximately December 8, 2001, and October 2005, Ms. Fallis wrote and
negotiated 75 unauthorized checks totaling $557,044.93 from the account
of her employer, the Perry Anthony Design Group (PADG). Between approximately January 2002 and
October 2005, she kept at least $504,681.22 of PADG’s cash receipts that she
was responsible for depositing into PADG’s account. In order to conceal and execute her scheme to
steal from PADG, beginning in 2002, and continuing until the third quarter of
2005, Ms. Fallis deliberately failed to make the quarterly Federal tax deposits
on behalf of PADG. In or around the summer
of 2005, when the IRS attempted to contact PADG to discuss the lack of
payments, Ms. Fallis diverted the IRS’s calls and notices to herself so that
the owner of PADG would not learn of the tax liability and her scheme to steal
from PADG. On June 23, 2005, July 21,
2005, and September 9, 2005, Ms. Fallis diverted the IRS’s calls by contacting
the IRS in Virginia via telephone from her
home in Delaware
and impersonating the wife of the owner of PADG.
Individual
Charged with Misuse of IRS Symbol
On January 23, 2008, a criminal
information was filed in the U.S. District Court for the Central District of
California, charging Amanda Evans with one count of misuse of a Department of
the Treasury name or symbol.
According to court documents, in
connection with a business activity on July 25, 2006, Evans knowingly used the words
“Internal Revenue Service” and the symbol of the IRS, in a manner that could
reasonably be interpreted and construed as conveying the false impression that
her business activity was endorsed, authorized by, and associated with the
Department of the Treasury.
James Richards Pleads
Guilty to Embezzling IRS Tax Payments from Clients
James Richards
pleaded guilty in U.S. District Court for the Western District of Missouri to
one count of accepting funds intended for the IRS, one count of evasion of tax
assessment, one count of representing himself as a Certified Public Accountant
(CPA) in documents submitted to the IRS, and one count of fabricating documents
purported to be from the IRS.
According to
court documents, Mr. Richards is the owner of Holliday and Associates, a sole
proprietorship that performs general accounting services and tax preparation
for clients. Mr. Richards routinely
asked clients to make payments toward their anticipated tax liability and make
the checks out to him or his company. Mr.
Richards accepted these estimated tax payments from his clients that were
intended for the IRS but failed to make the required tax deposits, pay their
estimated payments, or file the required forms with the IRS.
In addition, Mr.
Richards made false statements by claiming that he was a CPA in Missouri and
representing taxpayers before the IRS based on that status. To conceal his theft, Mr. Richards fabricated
IRS documents to stop collection activity for his clients.
IRS CID and
TIGTA worked on this case jointly.
Individual Indicted for Theft of Public
Money
Jennifer Jackson was indicted on
January 17, 2008, in the U.S. District Court for the Southern District of Texas
on one count of theft of public money.
According to court documents, on
or about May 9, 2005, Ms. Jackson knowingly converted for her own use a
cashier’s check for $19,749.69, made payable to the IRS for a client’s tax
payment.
![Text Box: DISTINGUISHED SERVICE AWARDS FOR INVESTIGATION OF LOAN OFFICER AND IRS REVENUE OFFICER IN FRAUDULENT SCHEME
TIGTA Special Agent Angela Druen (right) and IRS Criminal Investigation Division (CID) Special Agent Rodger Keester (center) pose with Thomas P. O’Brien, U. S. Attorney for the Central District of California, (left) after receiving distinguished service awards for their joint investigation of a loan broker who enlisted the aid of an IRS revenue officer to further his fraudulent schemes.
The loan broker paid the IRS employee to obtain sensitive tax information maintained in the IRS electronic environment, which the broker subsequently submitted to the IRS and to lending institutions in furtherance of his fraudulent schemes.
The IRS employee pleaded guilty to one count of violating Title 26, United States Code, Section 7214(A) (2), Offenses by Officers and Employees of the United States, and one count of violating Title 18, United States Code, Section 1001, False Statements. He was sentenced to one year of probation, and assessed a $500 fine and a $200 special assessment.
The loan broker pleaded guilty to one count of each of the following violations: Title 18, United States Code, Section 152 (3), False Statements in Bankruptcy Proceedings; Title 18, United States Code, Section 1029 (a)(2), Unauthorized Use of Access Device; Title 18, United States Code, Section 2, Principals [for aiding and abetting the IRS Revenue Officer to violate 26 U.S.C. 7214(a)(2)]; Title 18, United States Code, Section 1957(a), Money Laundering; and Title 18, United States Code, Section 1341, Mail Fraud. He was sentenced to 51 months in prison followed by three years of supervised release, was ordered to pay $661,695.17 in restitution and a special assessment of $600.](semiannual_mar2008_files/image006.gif)
Awards and Special Achievements
Executive Development Program
Graduates
On March 14,
2008, a graduation ceremony was held for the participants in the IRS’s Winter
2008 Executive Development (XD) Program.
The XD Program is the formal training phase of the IRS’s Senior Executive
Service Candidate Development Program.
TIGTA is participating in this program as a partner with the IRS. Its purpose is to identify outstanding
employees with demonstrated leadership competencies, to help participants
better understand the strategic vision of the Department of the Treasury as it
relates to their future role as an executive, and to prepare them for senior
executive positions. Preston Benoit
(middle row, second from left), Phil Shropshire (front row, second from left),
Deborah Trumbull (front row, third from left), and Nancy Berthold (front row,
fourth from left) graduated and are four of six TIGTA managers currently
enrolled in the program. TIGTA managers
Kenneth Casey and Damon Plummer will attend the Summer 2008 XD Program.
Audit
Statistical Reports
TIGTA’s
work is devoted to all aspects of activity related to the Federal tax system as
administered by the IRS. By identifying
and addressing the IRS’ management challenges, implementing the President’s
Management Agenda and the priorities of the Department of the Treasury,
TIGTA endeavors to protect the public’s confidence in the tax system. 