Thursday, August 1, 2013

IRS



Media Can't Ignore New Developments In IRS Scandal


Posted 07/31/2013 06:54 PM ET

IRS-Gate: From stonewalling Congress to Federal Election Commission collusion to harassment of already-tax-exempt conservative groups, the IRS scandal metastasizes. Someone high-up was clearly giving orders.

'Phony scandals," to use President Obama's term, should not generate near-daily news coverage from a media that would like nothing better than to see its dream president let off the hook. Yet everywhere you look comes another bolt of lightning keeping this Frankenstein monster "alive!":

In addition to conservative organizations being ultra-scrutinized in applying for tax-exempt status, existing conservative groups like Morton Blackwell's Leadership Institute, around since 1979, and the Claire Booth Luce Policy Institute, founded in 1993, were slammed with costly audits by Obama's IRS in the months before the 2012 election.

• With the IRS providing just a fraction of the documents requested, House Oversight Committee Chairman Rep. Darrell Issa, R-Calif., on Tuesday accused acting IRS commissioner Danny Werfel of systematically attempting "to delay, frustrate, impede and obstruct" the panel's probe.

• National Review reports that on-leave IRS tax-exempt division head Lois Lerner was in e-mail contact with at least one attorney at the Federal Election Commission — where she used to work — to whom she apparently gave tax status information of a conservative group, the American Future Fund, before the FEC lawyer recommended "that the commission prosecute it for violations of campaign-finance law." The FEC also asked about the conservative American Issues Project.

• A House Ways and Means Committee analysis found conservative groups were asked three times as many questions by the IRS and had longer delays than left-wing groups seeking tax-exempt status.

• A June 26 letter made public last Thursday from the IRS inspector general to House Ways and Means Ranking Democrat Sander Levin of Michigan "makes it clear the inspector general believes Tea Party groups did have it worse than progressives," the left-leaning National Public Radio conceded.

• While President Obama claimed when the IRS scandal came to light in May that "It's inexcusable ... and I'm angry about it," Politico reports this week that tax-exempt organizations commissioner Sarah Hall Ingram received "bonuses of $26,550 to $35,400 in fiscal years 2010, 2011, and 2012 ... 15 to 20% of her annual salary," while Lerner from 2006 to 2012 "was paid a combined total of $110,035 in bonuses." And senior IRS official Faris Fink, better known as Mr. Spock in the IRS' taxpayer-funded "Star Trek" parody, got "$149,506 in bonuses between 2007 and 2012." Clearly, someone above them was pleased.

• Appearing on Fox News Sunday, Treasury Secretary and ex-White House chief of staff Jack Lew didn't sound like someone sure that the IRS probes would find nothing: "I'm not saying it's done. We will cooperate with all of the ongoing investigations."

• At his "phony scandals" press briefing a week ago Tuesday, White House crisis manager Jay Carney was so intent on distracting reporters from IRS-gate and the other Obama scandals, he uttered the term "middle class" no fewer than 17 times — astonishing, considering that median household income is down 5%, almost $3,000, from the year Obama took office.

Lew, Carney and Obama himself act like people worried about a threat lying a little farther under investigators' shovels. And they should be considering the suspicious timeline of Obama-appointed IRS chief counsel William Wilkins visiting the president on April 23 last year; IRS Commissioner Douglas Shulman visiting the White House the next day; and Wilkins' office sending the IRS "guidance" on the Tea Party the day after that.

The IRS is one of the most powerful, frightening arms of the U.S. government. ObamaCare, about to be implemented, will mean "an unprecedented and unauthorized expansion of IRS power," bypassing Congress' constitutionally defined taxing powers, warns a soon-to-be-released book, "Impeachable Offenses."

If we find our tax-collection agency helped re-elect a president under political orders, Watergate could look trivial by comparison.

© 2013 Investor's Business Daily,



IRS In The Crosshairs: A Discussion With Acting Commissioner Werfel

 
While attending the IRS Nationwide Forum on Tuesday in Dallas, I had the opportunity to be part of a small group meeting with
Principal Deputy Commissioner Daniel Werfel.  His goal with our session was to have a substantive dialog regarding IRS strategic issues, something that is difficult to engage in currently in the beltway.  The session included industry representatives from the practitioner community (Enrolled Agents, CPAs, Registered Tax Preparers, Certified Acceptance Agents, software providers, former
IRS employees now working in the private sector).  The variety of niches represented and the volleying for why customer service should not be cut to each niche was enlightening.  As was Mr. Werfel’s awareness of the issues and limitations confronting each of the taxpayer constituencies represented.

I was impressed with Mr. Werfel. His reputation for integrity, professionalism and skill as a public sector management specialist is well deserved.  His ability to delve into and evaluate the operational fitness of the mammoth agency was apparent in his ability to engage our group.

For more than three decades I have been an observer of the odd love-hate relationship of Congress and the IRS.  But the vitriolic assault we have seen this year has gone further than ever in undermining the effectiveness of the organization.

Mr. Werfel allowed “the issues are certainly more complex than the media would have one believe, and it would be a mistake to assume the entire organization is flawed.  We cannot ignore where there are management challenges, but there are some parts of the organization that continue to exhibit strong and productive management.”

His goal is to keep an eye on the areas that do need a management intervention, and where there are problems, take corrective action. 

He intends to do this by avoiding distractions; staying focused on the task assigned, methodically, and professionally moving forward.

He points out that the travel and training issues occupying a great deal of the allegations of government waste aired this Summer actually took place in 2010, and had been significantly addressed prior to his arrival at IRS, and actually represent a miniscule proportion of the overall IRS budget.

He views the decision facing Congress on the budget issue as one of whether they will continue to Invest or Divest in IRS. His focus will be in making transparent the tradeoffs of either decision path.  Discussions about cutting the IRS budget by up to 24% would force choices about which of the functions IRS currently performs will be cast by the wayside.  Which programs are expendable?  Not funding enforcement (examination, collection or criminal investigation) or not funding services…like assisting with telephone services, walk-in centers, and filing season?

IRS doesn’t make the laws it is charged with administering.  It doesn’t create the mind-numbing complexity or create the structure of blending social and entitlement programs with those that generate revenue.  They are not given a choice as to which portions of the laws they choose to enforce.  Lay those decisions at the feet of our Legislators.

Mr. Werfel underscores that IRS will do the best they can at the level of funding Congress grants.  But he warns there are key areas that would be seriously impacted if funding is cut:
  • Identity theft; will it take 2 months or 2 years to resolve cases?
  • Modernizing fraud filters and detection methods
  • Movement to electronic portals
  • Implementing the Affordable Care Act
  • Offshore tax evasion enforcement efforts
Can the government operate with reduced revenue? While enforcement statistics are often cited as a return to the government of $4 for each budget dollar spent for those purposes, failure to provide funding for taxpayer services and a well-trained workforce can erode voluntary compliance as the public is not able to get the assistance it needs to file returns or deal with IRS inquiries.

Millions of individuals are contacted by IRS annually with letters and notices generated by automated enforcement systems. 

Automated mechanisms are good at creating assessments of additional tax against taxpayers.   However, without human staffing to respond when those notices and letters are wrong, and they are wrong more than one-third of the time, taxpayers will be injured by the way the laws are being administered. This leads to a perception of unfairness in the system and erodes voluntary compliance.

Mr. Werfel believes the greater threat to the organization is an erosion of respect for the Service and what it does.  I believe the perception of fairness in the way laws are administered plays an essential part in taxpayer respect for the IRS and willingness to pay one’s “fair share.”  I also believe a healthy respect for the enforcement function (fear factor) of dealing with the agency contributes significantly to the level of compliance.  Both service and enforcement by a well trained workforce and access to people to resolve issues efficiently when needed are essential elements to building respect for the organization.

Can the tax system afford the cost of Congressional budget cuts?  Can the tax system afford the erosion of respect the media frenzy of this summer has focused on it? Years of doing more with less combined with the sequestration, scandal, and budget uncertainty could lead to inertia. Mr. Werfel is optimistic there will be no inertia and no stagnation on his watch.

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