AUDITING THE IRS
APRIL 11, 1997
Experts discuss why the GAO is calling the IRS a "high risk" agency, rife with waste, fraud, abuse, and mismanagement. What's more, employees have been caught snooping confidential returns. A background reportis followed by a panel discussion.
KWAME HOLMAN: By next Tuesday, April 15th, more than 200 million people have filed tax returns for 1996, the one experience nearly all Americans share. But if taxpayers dislike the agency that takes part of their income, they may be comforted by the fact that the tax man, himself, is under fire. Problems at the Internal Revenue Service are nothing new. For the last six years Congress's watchdog arm, the General Accounting Office, has had the IRS on its list of agencies at high risk of committing waste, fraud, abuse, or mismanagement.
A RealAudio version of this NewsHour segment is available.
April 11, 1997
A panel discussion on the embattled IRS.
October 3, 1996
Kwame Holman reports on two dueling tax plans .
Sept. 29, 1996: On PBS Debate Night, the four Congressional leaders debate tax cuts.
March 7, 1996: Paul Solman reports on the history of taxes--and anti-tax sentiments.
January 17, 1996: A debate on changing and flattening theU.S. tax system.
The NewsHour Economy Page.
SEN. FRED THOMPSON, (R) Tennessee: (Yesterday) It's outrageous that IRS programs put on the GAO's high risk list remains there year after year. Six years later, hearing virtually the same message and the same areas from the GAO.
KWAME HOLMAN: Last year Congress charged a bipartisan commission with recommending ways to overhaul the tax agency, and this year the Clinton administration came up with a plan of its own. The IRS has more than 100,000 employees and operates 10 regional service centers, each the size of a small city. The process of handling millions of tax returns requires the IRS sort through 1.2 billion pieces of information from taxpayers and from some 12,000 financial institutions.
Most of the IRS's problems can be traced to an effort to modernize and computerize its information handling that's taken decades and costs nearly $4 billion. Lynda Willis, who heads the tax policy group at the General Accounting Office, says the entire modernization effort largely has been a failure.
LYNDA WILLIS, General Accounting Office: When they went back and started to look at their processes, they realized that all of these systems that they were building didn't talk to each other, couldn't be integrated, didn't meet their new business requirements, and on top of all of that, they weren't building them very successfully.
KWAME HOLMAN: Congressman Rob Portman, co-chair of the congressional commission, working to restructure the IRS, told producer Carol Blakeslee-Collin the problems don't end with the IRS's computer.
REP. ROB PORTMAN, (R) Ohio: The phone won't work. Only about half of the taxpayers are getting through to the IRS. In the last filing season GAO told us only 26 percent of the taxpayers were getting through the first time to the IRS. When people do get through, they're not always getting the right answer, and often the person that they're talking to can't provide them information again because of the computer challenges. A taxpayer assister may have to go into as many as nine different separate computer systems to find an answer to my tax problem or yours.
KWAME HOLMAN: Portman says those and other structural problems have led to a 22 percent error rate on tax returns. Half the mistakes are made by filers, half by the IRS. In 1986, the IRS introduced electronic filing, filing a return by computer, which can reduce the error rate to as little as 1 percent. But critics say the agency undercut its own good idea by charging a fee for electronic filing, cutting into its popularity with taxpayers. The structural problems have impeded the IRS's efforts to go after the estimated 40 million Americans who should file a return but don't. But GAO's Willis says the IRS's problems are so fundamental the agency can't even be audited reliably.
LYNDA WILLIS: And as a result, we can't ascertain with the degree of certainty that's required that the money is being credited to the right accounts; that we know how we're spending the appropriations given to IRS; or that we can account, in general, for the money flowing into the government.
KWAME HOLMAN: As if those woes weren't enough, the IRS took another major blow this week. The GAO reported that despite repeated threats and warnings, IRS workers have continued to snoop into the tax returns of individuals, including those of relatives and celebrities. The GAO blamed IRS supervisors for failing to impress on workers the seriousness of the offense. All those issues were on the table yesterday at a hearing called by the Senate Governmental Affairs Committee. Committee Chairman Fred Thompson wasted no time in calling IRS Deputy Commissioner Michael Dolan to task.
SEN. FRED THOMPSON: You show up on these high risk lists year after year. What has been the nature of the problem, do you think, in the past that's caused this?
MIKE DOLAN, Deputy Commissioner, IRS: I think what our recent history has taught us specifically, not about the government as a whole, but specifically, is that our appetites were too large and that we attempted to tackle that larger than life objective too much dependent on our own skills and resources. If you go back and fill in some of those time slots, you see some real rough and tumble in the process of trying to do major systems improvements in the government.
KWAME HOLMAN: The Commission report on the IRS isn't due until July, but members of Congress are taking some steps immediately. On April 15th, they'll vote on making IRS workers' browsing of tax returns a criminal offense.