IRS Auditors Claim Billions Lost Under Pressure

A Congressional committee is looking into IRS auditors’ complaints that they are being forced to close corporate cases prematurely, leaving billions in tax dollars unpaid.

In interviews, these revenue agents warned that unless they were free to pursue what their instincts tell them, their focus would end up being only on known abuses, and new ones created by the tax advice industry would go undetected.

The agency countered that it had increased the number of companies whose tax returns it examined by a fourth since 2001, even though the number of auditors was virtually the same.

All 21 agents interviewed said that the IRS did not consistently adhere to its “do the right thing” policy. The agents provided e-mail messages and memos in which managers and executives made little or no mention of anything but closing files quickly.

Two auditors described separate training sessions that began with a few words about the “right thing” policy, then focused entirely on closing cases by the preset deadlines.

All of the agents interviewed said they believed that the controlling factor in determining whether their superiors qualified for cash bonuses and promotions was their success at closing cases.

IRS officials characterized the auditors who are complaining as mostly older agents unwilling to adopt new approaches.

Deborah M. Nolan, the IRS official in charge of auditing businesses with more than $10 million of assets, said that her auditors recommended payment of almost $27 billion in additional taxes last year, more than double the amount in 2001, but down 15 percent from 2005 when added taxes totaled almost $32 billion.

She said these numbers vindicated the strategy of focusing on auditing more companies and focusing on large-dollar tax issues, not lesser ones.

According to the New York Times, one veteran agent of the largest corporate audits compared the IRS to a crew that walks through an orchard instead of working from ladders.

“You can grab all the low-hanging fruit in a few highly productive hours, while leaving most of the harvest untouched,” he said.

In an interview last week, Nolan said she was aware of such complaints and had created a Web address for employees to report their concerns.

Another agent, who said he had worked on some of the largest IRS cases, said he was admonished for resisting management pressure to close a case in which his team believed that vast sums were due.

The agent said his team was forced to sign off on a closing agreement allowing the company to permanently underpay its taxes by hundreds of millions of dollars a year.

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