The IRS has been in plenty of hot water lately for allowing staffers to enjoy lavish accommodations at conferences and squander taxpayer funds on video spoofs purportedly created for training purposes. Now, the Treasury Inspector General for Tax Administration (TIGTA) is turning up the heat again.
In a new report released on February 18, TIGTA says some IRS executives have been dodging taxes on travel excursions.
Generally, travel reimbursements while taxpayers are away from home are taxable if the assignment isn’t temporary. Taxable travel includes trips to a single location expected to last more than one year or when employees perform their principal duties in a location away from their tax home and the arrangement is expected to last indefinitely or long enough for the new destination to become their main work location.
In the report, TIGTA looked at whether the IRS has established sufficient guidance and procedures relating to taxation of overnight long-term travel by employees. The review was a follow-up to a previous TIGTA report in July 2013 that found the IRS had spent $9 million on executive travel in fiscal years 2011 and 2012 combined. Also, a small number of IRS executives had extremely high travel expenses, as compared to other executives.
The latest TIGTA report found that the IRS had established adequate guidance defining the circumstances when travel is taxable. However, although the IRS had instituted a quarterly review process to identify potential long-term taxable travel, the criteria could be improved. Furthermore, the IRS hasn’t documented the procedures for conducting these travel reviews.
TIGTA sampled the travel records of thirty-one executives and determined 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, in a written statement.
As a result of this study, TIGTA recommended that the IRS CFO modify and document procedures for conducting periodic reviews to determine if employees and managers accurately determine and report taxes relating to long-term travel. It also said the CFO should issue an annual reminder to IRS employees about the policies and procedures relating to their travel status. For its part, the IRS agreed with TIGTA’s recommendations and stated that it plans to take appropriate corrective actions.