Don't Mess With Taxes

The Treasury Inspector General for Tax Administration, or TIGTA, the independent Internal Revenue Service watchdog, issues a report to Congress twice a year. Its latest information download to lawmakers was released on June 2, on the heels of the tax agency’s own assessment.

The IRS Data Book is, understandably, designed to highlight the agency’s successes. TIGTA’s Semiannual Report to Congress takes a broader view of IRS activities. Reading both can provide a more balanced evaluation of where the IRS is doing well, improving, or needs to step up its efforts.

As you would expected, the TIGTA’s report also is full of data, as noted on the cover image at the top of this post. It details TIGTA efforts that, like the stated goals of the Department of Government Efficiency (DOGE) microscope, help identify, stop, and recover losses from agency waste and fraud.

So, TIGTA’s $887 million in monetary benefits produced by its investigations, audits, and examinations during this report’s Oct. 1, 2024, through March 31, 2025, time period is this weekend’s By the Numbers figure.

Here are some of the TIGTA report highlights that helped them reach that number.

Erroneous offset refunds: One of the IRS’ jobs is helping collect other unpaid federal and state amounts, most commonly student loans and child support. The IRS does this by offsetting the unpaid debts from affected taxpayers’ federal tax refunds.

A TIGTA investigation found 4,519 individual and business tax accounts with overpayments totaling $78.6 million for which overpayments were not applied to outstanding tax debt due to procedural and computer programming errors.

In addition, investigators identified 11,206 individual taxpayers who were issued more than $9.1 million in refunds since calendar year 2017 that should have been offset to outstanding sole proprietorship tax debt. Another 169 individual taxpayers and 53 business taxpayers were issued more than $8.4 million in refunds since 2017 that should have been applied to an associated outstanding tax liability.

According to the IRS, these overpayments were not applied to outstanding tax debt due to IRS employees manually issuing the refund causing the offset program to be bypassed.

TIGTA also identified more than $357.9 million in outstanding tax debt that was not protected from erroneous refunding.

Dishonored check costs: Another problematic tax refund area also was discovered by TIGTA.

The oversight office reported that from January 2023 through March 2024, the IRS processed more than 1.5 million dishonored checks submitted as tax payments received after a return is filed. Those bounced checks totaled nearly $4.7 billion.

How did this happen? TIGTA found that the IRS does not have a computer program that sufficiently delays refund issuance to allow it to receive dishonored check information from financial institutions. This puts the tax agency at risk of generating millions of dollars in erroneous refunds.

TIGTA identified 7,765 individual taxpayers who may have received approximately $43.7 million in erroneous refunds based on dishonored checks that posted to their tax accounts in the 15 months of refunds it examined.

“We recommended the IRS ensure a computer programming change is completed to delay these types of refunds for two cycles to provide the IRS time to receive dishonored check information from financial institutions. The IRS agreed with this recommendation,” noted the TIGTA report.

Employee integrity issues: Many people are upset with DOGE staff being allowed a look at IRS data. But IRS employees sometimes do violate the agency’s and federal law’s requirements when it comes to ensuring that the U.S. tax system is trustworthy.

IRS employee misconduct can erode the public’s trust and impede the agency’s ability to effectively enforce tax laws, noted TIGTA.

“Employee misconduct can take many forms, such as: the misuse of IRS resources or authority; theft; fraud; extortion; taxpayer abuse; unauthorized access to, and disclosure of, tax returns and return information; and identity theft. During this reporting period, employee integrity investigations accounted for 49 percent of our work,” according to the repot.

TIGTA during this last reporting period conducted 463 employee misconduct investigations that were referred to the IRS for action. The IRS acted on, up to and including termination, on 421 investigations and closed 42 without action.

The specific cases cited in the report include situations of IRS employees who —

• Misrepresented suitability for federal employment,
• Indicted for a role in Coronavirus Aid, Relief, and Economic Security (CARES) Act fraud, and
• Pleaded guilty for a role in defrauding the Department of Veterans Affairs out of $130,428.

IRS employees safety investigations: TIGTA also looked into threats and assaults directed at IRS employees and facilities. These illegal acts, noted the watchdog, impede the effective and safe administration of the federal tax system and the IRS’ ability to collect tax revenue.

TIGTA investigations in this area covers not only physical threats, but also cyberspace acts that hamper of interfere with IRS employees who are performing their official duties.

Twenty-one percent of TIGTA’s work during the six months covered in its latest report involved employee and tax infrastructure security investigations.

Another 30 percent of TIGTA’s work during this time frame was investigating attempts to corrupt or impede tax administration.

You also might find these items of interest:

• TIGTA celebrating 25 years of keeping an eye on the IRS
• IRS collected record-breaking $5.1 trillion in taxes in 2024
• TIGTA investigating DOGE and White House incursion into IRS

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