Posts Tagged ‘IRS.Scandal’

The Two Year Gap

Sunday, June 15th, 2014

Do you remember how the IRS scandal began? It began when Lois Lerner made a speech and noted that the IRS erred and targeted conservative and Tea Party 501(c)(4) applicants. This occurred on a Friday afternoon.

Shock of shocks, another bit of news came out on a Friday afternoon of similar importance. The IRS is claiming that they lost Lois Lerner’s emails. For reasons I’ll get to in a few moments, this simply fails the smell test. The IRS says that they’ve made heroic efforts in attempting to recover the missing emails which cover a two-year period.

The problem with the IRS statement is simple: Email moves through email servers. Here’s a post on this at the Blaze with details on how email works. Here’s the concluding paragraph:

“I don’t know of any email administrator that doesn’t have at least three ways of getting that mail back,” [Norman Cilio, a former program manager at Microsoft] added. “It’s either on the disks or it’s on a TAPE backup someplace or in an archive server. There are at least three ways the government can get those emails.”

Mr. Cilio’s conclusion: The IRS is lying.

As an owner of a business in a regulated industry, I’m required to keep my emails (both coming and going). I’m not a technology wizard, but my IT person has told me that we do various backups that keep the information and store them in multiple ways. We use RAID technology–basically, a system where one hard drive is a copy of the working hard drive so if the working hard drive crashes, the backup immediately takes over with no loss of data.

PowerLine has a post noting that the IRS uses similar systems. Lois Lerner’s computer shouldn’t be relevant at all; it’s the IRS email servers and backup systems that are relevant.

House Ways and Means Committee Chairman Dave Camp issued a statement that isn’t as pointed as it likely should be. An excerpt:

“The fact that I am just learning about this, over a year into the investigation, is completely unacceptable and now calls into question the credibility of the IRS’s response to Congressional inquiries. There needs to be an immediate investigation and forensic audit by Department of Justice as well as the Inspector General.

“Just a short time ago, Commissioner Koskinen promised to produce all Lerner documents. It appears now that was an empty promise. Frankly, these are the critical years of the targeting of conservative groups that could explain who knew what when, and what, if any, coordination there was between agencies. Instead, because of this loss of documents, we are conveniently left to believe that Lois Lerner acted alone. This failure of the IRS requires the White House, which promised to get to the bottom of this, to do an Administration-wide search and production of any emails to or from Lois Lerner. The Administration has repeatedly referred us back to the IRS for production of materials. It is clear that is wholly insufficient when it comes to determining the full scope of the violation of taxpayer rights.”

My conclusion is succinct: Either the IRS is deliberately lying or they have the worst IT department and policies of any company, organization, or government entity in the world. I am forced to conclude the IRS is lying.

IRS Adopts “Taxpayer Bill of Rights;” Will Anything Change?

Tuesday, June 10th, 2014

With great fanfare the IRS today announced the adoption of The Taxpayer Bill of Rights. As noted in the IRS announcement,

The Taxpayer Bill of Rights takes the multiple existing rights embedded in the tax code and groups them into 10 broad categories, making them more visible and easier for taxpayers to find on

Publication 1, “Your Rights as a Taxpayer,” has been updated with the 10 rights and will be sent to millions of taxpayers this year when they receive IRS notices on issues ranging from audits to collection. The rights will also be publicly visible in all IRS facilities for taxpayers and employees to see.

“The Taxpayer Bill of Rights contains fundamental information to help taxpayers,” said IRS Commissioner John A. Koskinen. “These are core concepts about which taxpayers should be aware. Respecting taxpayer rights continues to be a top priority for IRS employees, and the new Taxpayer Bill of Rights summarizes these important protections in a clearer, more understandable format than ever before.”

My question to the IRS: Will anything change? Let’s look at the IRS scandal and these rights. (Six of the ten rights appear to me to be directly applicable to the current IRS scandal.)

1. The Right to be Informed. “[Taxpayers] have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.” There are a large number of 501(c)(4) organizations that still don’t know exactly what happened.

2. The Right to Quality Service. “Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to speak to a supervisor about inadequate service.” Again, a large number of 501(c)(4) organizations had nothing of the kind.

4. The Right to Challenge the IRS’s Position and be Heard. “Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.” That didn’t happen.

6. The Right to Finality. “Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt.” If not for TIGTA, there wouldn’t have been any finality with the 501(c)(4)’s.

7. The Right to Privacy. “Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections and will provide, where applicable, a collection due process hearing.” No comment here is necessary.

8. The Right to Confidentiality. “Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information.” Please see yesterday’s post.

Until the IRS comes clean on the IRS scandal, what was released today makes a great sound bite but is otherwise nothing new. The IRS appears to have violated six of the ten rights, and is still stonewalling Congress on the scandal. The IRS’s budget won’t be increased because of today’s press release.

For the record, I do want to note that most IRS employees are professional, courteous, and a pleasure to deal with. I had an Appeals hearing today, and though we did not agree on everything, the Appeals Officer explained his position, and listened intently to my position. This led to a fair resolution of my client’s case. In general, most IRS employees exhibit this behavior. It’s a shame that the IRS scandal is causing damage to the agency, but this scandal emanates from the top (or somewhere near the top).

Perhaps This Is Why Lois Lerner Is Taking the Fifth

Monday, June 9th, 2014

You remember the IRS scandal? It’s still around, and it appears that the IRS (or highly placed individuals at the IRS) violated the law.

From Eliana Johnson comes a report that begins,

The Internal Revenue Service may have been caught violating federal tax law: In October 2010, the agency sent a database on 501(c)(4) social-welfare groups containing confidential taxpayer information to the Federal Bureau of Investigation, according to documents obtained by a House panel.

Congressmen Darrell Issa and Jim Jordan sent a letter to IRS Commissioner John Koskinen demanding information:

The Committee learned recently that the IRS transmitted 21 disks containing over 1.1 million pages of information about tax exempt groups to the Federal Bureau of Investigation in October 2010 in advance of Lois Lerner’s meeting with the Justice Department about potentially using campaign-finance laws to criminally prosecute certain nonprofit groups engaged in political speech. We were extremely troubled by this new information, and by the fact that the IRS has withheld it from the Committee for over a year. We were astonished to learn days ago from the Justice Department that these 21 disks contain confidential taxpayer information protected by federal law. We ask that you immediately produce all material explaining how these disks were prepared and transmitted to the FBI.

Here are the emails that show this happened:

Violating federal law is a very good reason to take the Fifth Amendment. Now, it might not have been Ms. Lerner who ordered this, but if it wasn’t her she definitely knows who it was.

Additionally, the IRS’s non-cooperation with the House Committee on Oversight and Government Reform and the general IRS attacks on the GOP don’t sit well with the GOP. Until it is learned who ordered the IRS policy on 501(c)(4) organizations, the IRS’s budget will be shrinking, not increasing. Based on what I just read, if anyone is expecting the IRS’s budget to increase this year, well, that has as much chance as it snowing here in Las Vegas tomorrow. (The high is expected to reach just 105 F.)

While I Was Out…

Sunday, April 20th, 2014

I’ve recovered from Tax Day, my sleep is caught up, and it appears Las Vegas has moved smoothly towards summer (it reached 89 today). There has been a little bit of tax news during the past month:

Good News for Tax Professionals: The IRS announced that eServices has been updated and you can request a transcript for an individual where you have a Tax Information Authorization (Form 8821). I have not tested this new capability yet, but if this works we will no longer have to have a Power of Attorney in order to use eServices for transcripts.

That said, the IRS announcement (it came in late March) said that eServices was updated last fall. If it was, it wasn’t successfully updated; I tried to request a transcript for a client with an 8821 in December and couldn’t.

The IRS Scandal Continues to Percolate, with Bad News for Lois Lerner: Emails sent to and from the IRS and Lois Lerner have been made public, and these do not show Ms. Lerner in a good light. They show that Ms. Lerner was definitely involved in targeting conservative non-profits. They were obtained by Judicial Watch after filing a freedom of information act lawsuit against the IRS.

My favorite, though, is one where Cindy Thomas complains that Ms. Lerner and the White House through the Cincinnati “low-level” employees under the bus. I’ll let Ms. Thomas explain:

As you can imagine, employees and managers in EO Determinations are furious. I’ve been receiving comments about the use of your words from all parts of TEGE and from IRS employees outside of TEGE (as far away as Seattle, WA).

I wasn’t at the conference and obviously don’t know what was stated and what wasn’t. I realize that sometimes words are taken out of context. However, based on what is in print in the articles, it appears as though all the blame is being placed on Cincinnati. Joseph Grant and others who came to Cincinnati last year specially told the low-level workers in Cincinnati that no one would be “thrown under the bus.” Based on the articles, Cincinnati wasn’t publicly “thrown under the bus” instead was hit by a convoy of mack trucks.

Was it also communicated at that conference in Washington that the low-level workers in Cincinnati asked the Washington Office for assistance and the Washington Office took no action to provide guidance to the low-level workers?

One of the low-level workers in Cincinnati received a voice mail message this morning from the POA for one of his advocacy cases asking if the status would be changing per “Lois Lerner’s comments.” What would you like for us to tell the POA?

How am I supposed to keep the low-level workers motivated when the public believes they are nothing more than low-level and now will have no respect for how they are working cases? The attitude/morale of employees is the lowest it has ever been. We have employees leaving for the day and making comments to managers that “this low-level worker is leaving for the day.” Other employees are making sarcastic comments about not being thrown under the bus. And still other employees are upset about how their family and friends are going to react to these comments and how it portrays the quality of their work.

Another email shows that the IRS planned to meet with the Department of Justice over whether to prosecute conservative groups. I’ll leave it to the reader to decide whether or not there’s anything to see here.

Second Runner-Up for 2013 Tax Offender of the Year Gets 20 Years at ClubFed. Phillip Monroe Ballard decided to channel the spirit of 2012 Tax Offender of the Year Stephen Martinez: He decided to murder the judge of his tax evasion trial. Luckily for all concerned, an informer let authorities know of the plan. Mr. Ballard not only has a tax conviction but now a 20-year sentence for attempted murder-for-hire. Given he’s 72, he’ll likely spend the rest of his life at ClubFed.

IRS Harassment of Tea Party Groups Reportedly Has Continued

Saturday, February 8th, 2014

Congress continues to investigate the IRS scandal, and news this week indicates that it continues. Here’s the first two paragraphs of a Washington Examiner article:

Tea Party officials told a congressional panel Thursday they are still being targeted for harassment despite claims by President Obama and top IRS officials that the illegal activities were stopped last year.

“It’s shocking, it’s repugnant, it’s infuriating,” Becky Gerritson told a subcommittee of the House Oversight and Government Reform Committee. “And most troubling of all, those responsible have not stopped.”

Meanwhile, IRS attorney William Henck has been in the IRS Office of the General Counsel for over 26 years. He wrote a piece for the PowerLine blog. It is one of the most disturbing things I’ve read in quite some time. Here’s an excerpt:

I do not personally know whether the IRS has targeted conservative groups or individuals, but I do know that the environment within the agency is ripe for such activity and there is nothing to prevent it from occurring. As stated in more detail below, I have personally witnessed improper giveaways of billions of dollars to taxpayers with inside access at the agency, bullying of elderly taxpayers, the cover-up of managerial embezzlement and misappropriation of thousands of dollars in government funds, and a retaliatory audit. I have also heard credible accounts of, among other things, further improper giveaways, blatant sexual harassment, and anti-Semitism. All of these matters have been swept under the rug.

I strongly suggest you read the entire thing.

Finally, we have President Obama stating that there was no corruption involved with this scandal. Here’s the quote from an interview he had with FoxNews’s Bill O’Reilly:

O’REILLY: You’re saying no corruption, none?

OBAMA: There was some bone-headed decisions.

O’REILLY: Bone-headed decisions. But no mass corruption?

OBAMA: Not even mass corruption. Not even a smidgeon of corruption.


Republicans in Congress have cut the budget to the IRS because of the scandal. And whether you’re a member of the GOP, a Democrat, or an independent (politically), Republicans are correct in doing this. As I’ve said before, we need a non-partisan IRS. Until the true cause of the scandal is known (and whatever it is, it’s in Washington, not Cincinnati), we’re all going to pay the price. Sooner or later the news will come out, and most likely to the detriment of those in power in Washington.

Pass the Popcorn, Please, II

Wednesday, November 20th, 2013

As ObamaCare and its troubles dominate the news, lurking in the background is the IRS scandal. The Chief Counsel of the American Center for Law and Justice (ACLJ) wrote an op-ed on FoxNews that noted the lawsuit filed by the ACLJ isn’t going to be dropped. Jay Sekulow, the Chief Counsel, noted five reasons why the IRS scandal won’t go away. I’m going to focus just on his fifth point:

Fifth, the IRS targeting scandal is directly relevant to the mother of all policy disasters, ObamaCare. With the IRS set to function as ObamaCare’s enforcement arm, every story of corruption, incompetence, and malice casts doubt on the IRS’s ability faithfully and lawfully discharge its responsibilities within our health care system. [emphasis in original]

Eliana Johnson of the National Review had two tweets last night that highlight this issue. Here’s the first:

IRS source tells me that “last thing in the world anybody wants right now is IRS connected to that pile of crap at”

Here’s the second:

IRS source says agency still working to link IRS sys to HHS and CMS. “Our guys can’t move until HHS and CMS get their crap together.”

President Obama promised that the website would be functioning by month-end. It’s apparent to almost everyone that is not going to happen. Meanwhile, individuals need to enroll by December 15th in order to have coverage by January 1st; the back-end payment system has apparently not yet been built! (The key point in the testimony begins at about 3:20):

If health care weren’t such a major issue this would be laughable. Unfortunately, it is a major issue. I have not talked with many individuals at the IRS regarding health care and the IRS’s role in ObamaCare. I notice that in today’s IRSAC report that IRSAC identified as its very first issue the IRS’s funding level. IRSAC rightly noted that, “Reducing the IRS’s budget constrains IRS effectiveness and efficiency, which results in taxpayers’ loss of respect for the agency and our voluntary tax system.”

I identified this issue earlier this month. I’ll repeat what I said then:

For the IRS to function effectively, it needs both a reasonable budget and to be apolitical. It’s vital that the Department of Justice go after individuals who turn the IRS into a political organization from an apolitical one. Yet the current Administration apparently doesn’t see the urgency in this issue. That’s a huge mistake, and one that will definitely come back to haunt them and all Americans. We need a well functioning IRS…and given what the Administration is doing (and not doing), it’s very likely the budget for the IRS will continue to shrink.

The Obama Administration needs to give more than lip service to the investigations of the IRS scandal. Does anyone really believe that the Department of Justice is doing anything in regards to this? The budget of the IRS will not be increased until the scandal is resolved. As Mr. Sekulow noted, the IRS scandal and the troubles of ObamaCare are directly linked.

The individuals I have dealt with at the IRS are normal hard-working people doing jobs. The IRS deserves better than what it’s getting from the Obama Administration. IRSAC’s recommendation is laudable, but Congress’s cutting the IRS’s budget is also reasonable until the scandal is resolved. The onus here lies on the current Administration. I suspect IRSAC will be repeating their recommendation in next year’s report.

IRS Scandal Update

Sunday, November 3rd, 2013

The political news has been dominated as of late by the ObamaCare follies. However, the IRS scandal continues to percolate. There has been some news this past week:

The National Organization for Marriage sued the IRS over the leak of its Form 990 Schedule B; that schedule contains NOM’s list of donors. That’s confidential under the law. Unfortunately, someone at the IRS leaked that Schedule B to its political opponent, the Human Rights Campaign. That in itself is a violation of federal law. It appears the House Ways and Means Committee has figured out who the villain is, and they would like to see the Department of Justice prosecute that individual. No word from the DOJ on this happening; given the politicized nature of the current DOJ, I doubt we’ll see this happen.

Meanwhile, it appears we know why Lois Lerner took the Fifth: The Washington Examiner accuses Ms. Lerner of sharing confidential tax information of several Tea Party groups with the Federal Elections Commission. That’s also a violation of the law. Though the Examiner is the accuser, it’s really Judicial Watch that’s making the accusation; that organization obtained emails under a Freedom of Information Act request that allegedly show Ms. Lerner emailed the confidential information. I’m sure the DOJ will get right on this (not).

For the IRS to function effectively, it needs both a reasonable budget and to be apolitical. It’s vital that the Department of Justice go after individuals who turn the IRS into a political organization from an apolitical one. Yet the current Administration apparently doesn’t see the urgency in this issue. That’s a huge mistake, and one that will definitely come back to haunt them and all Americans. We need a well functioning IRS…and given what the Administration is doing (and not doing), it’s very likely the budget for the IRS will continue to shrink.

Welcome Instapundit readers. I cover taxes with an emphasis on small businesses and gambling (my two tax practice specialty areas); I also focus on Nevada and Maryland (where our two offices are) and California (where I used to live and work). I try to have some fun with taxes as the subject is generally tedious.

IRS Scandal: Lerner, Others Re-Enter Spotlight

Tuesday, September 17th, 2013

The IRS scandal hasn’t gone away. More documents have been released, and they’re not flattering towards Lois Lerner. Government Executive has this:

In a June 2012 email responding to an NPR story discussing the Democratic Senatorial Campaign Committee complaint with the FEC regarding some conservative groups, Lerner speculated to a colleague, “Perhaps the FEC will save the day.”

In a February 2011 email on the Cincinnati-based unit of the Exempt Organizations division assigned to handle tea party groups’ applications, Lerner wrote, “Tea Party Matter very dangerous….Counsel and Judy Kindell need to be in on this one….Cincy should probably NOT have these cases.”

Glenn Reynolds (of Instapundit fame) has a column where he notes Lerner’s statements (from the emails). Mr. Reynolds’ conclusion is that this boils down to trust, and that the IRS and the principals in this scandal have oozed anything but trust.

Politico notes that the players in the IRS scandal have lawyered up with “elite D.C. lawyers.”

Finally, an article in USA Today notes the following:

Newly uncovered IRS documents show the agency flagged political groups based on the content of their literature, raising concerns specifically about “anti-Obama rhetoric,” inflammatory language and “emotional” statements made by non-profits seeking tax-exempt status.

The Administration was probably hoping this scandal would fade into the woodwork. I’m certain that the IRS was hoping for that, too. However, as long as the IRS and the principals involve evade–the official Administration response is still that this was all the work of rogue agents in Cincinnati (nobody believes that anymore)–the scandal will continue to percolate.

Did IRS Give Black Nonprofits Preferential Treatment?

Sunday, September 8th, 2013

Investors Business Daily reported in an editorial that the IRS “selectively advised black churches and other Democrat nonprofits on how far they can go in campaigning for President Obama and other Democrats” during the 2012 campaign. IBD reported that Attorney General Eric Holder and then IRS Commissioner Douglas Shulman spoke to black church leaders at the gathering.

It is the appearance of impropriety that the IRS must avoid. The IRS continues to do a wonderful job of appearing to raise issues with their behavior. And their behavior has almost certainly been a classic example of impropriety.

The Apprentice, IRS Style

Sunday, September 8th, 2013

The IRS made videos parodying Star Trek and Gilligan’s Island. It’s time for another: The Apprentice, IRS Style:

On the bright side, this video only cost us taxpayers $10,000; the Star Trek and Gilligan’s Island parodies cost a reported $60,000 each. What I’d like to see next from the IRS is a parody of Perry Mason where at the end we find out who ordered the IRS to target conservative applicants for 501(c)(4) status.