IRS AGENTS: TREAT YOURSELF (ON THE TAXPAYERS’ DIME)

Government bureaucratic inefficiency, mismanagement, and theft is by and large the status quo for most federal and state government agencies and offices. From the outright corruption of the Bell City Council which resulted in the mayor’s arrest and conviction,[1] to the Pentagon having 6.5 Trillion Dollars in accounting and bookkeeping irregularities,[2] Nikita Khrushchev’s famous statement “Politicians are the same all over. They promise to build bridges even when there are no rivers." In the most recent example of massive government spendthrift and unaccountability, the U.S. Senate Finance Committee released a special report on December 14, 2016[3] which detailed extravagant, lavish and unjustified out of control spending by IRS agents—all of which is reimbursed 100% at every tax payer’s expense.

The IRS diligently scrutinizes whether or not you correctly reported the exact square-feet of your home office on your deduction, but is apparently incapable of noticing that one agent racked up $40,000 for a five month stay at the Grand Hyatt in Washington, D.C.—the same city where the IRS headquarters is located. In all total, the IRS allowed 27 employees to collectively spend more than $1.4 Million Dollars on long-term “travel related” expenses in 2015, including one agent charging $4,950 per month for the entire year’s rental of a townhouse in Arlington, Virginia.

How is the government agency that is charged with hounding you and collecting your money this bad at monitoring their own expenses? It stems from equal parts apathy and idiocy. The federal guidelines for employee are aggressively vague. The only requirement is that they exercise the same degree of thriftiness as a “prudent, average person.” That kind of ambiguity is ripe for abuse. And according to the Senate, it is clearly being abused. Compounding the problem is that the agency itself does not take that guideline seriously. The IRS allows employees travelling to Washington, D.C., regardless of from where they originate, to claim up to $7,099 a month for accommodation and travel related expenses. Some of these agents even went so far as to expense their taxi ride to the grocery store, restaurant or bar while travelling. One specific agent was reimbursed $1,513 for dry cleaning while travelling. While laundry reimbursement is permitted under the Federal Trade Regulation[4], that kind of expenditure is not what the regulation had in mind. That is patently absurd.

The IRS could (and should as the Senate Report suggests) reduce the per diem rate in some of these extreme circumstances. However, the IRS manual itself makes it extremely burdensome to do that. The manual states that, in order for the per diem rate to deviate down from the maximum allowed, an approving official must submit a memorandum justifying a different per diem rate for approval by the Associate Chief Financial Officer (“ACFO”) for Financial Management. If approved, the requesting official must inform the employee of the reduced per diem rate before the trip and the travel authorization must contain the lower authorized per diem rate in advance of the travel. Unsurprisingly, the Senate Finance Committee found that no such requests were made in FY 2015.

And this is not the first time the IRS has been notified of gross mismanagement of expenses, recently. In a report by the Treasury Inspector General from 2013,[5] the Inspector General recommended “the IRS should consider a temporary or permanent change of station as an alternative to long term temporary duty travel.” As is obvious by the 2016 report, that advice was ignored.

Just in case the Senate Finance Committee report itself was not scathing enough, Senate Finance Committee Chairman Orrin Hatch of Utah decided to write a cover letter to the report, directly to IRS Commissioner John Koskinen. In the letter, Hatch opines, “The lack of effort by IRS employees to exercise prudence and economy when utilizing taxpayer funds is concerning, and more importantly a direct and apparent violation of the FTR.”

The Internal Revenue Service (IRS) budget has been cut by 17 percent since 2010, and in April, Commissioner Koskinen testified[6] before the Senate Ways and Means Committee to ask for additional funding for the agency. Maybe if the IRS tightened its britches a little with regard to employee spending, it wouldn’t be so hard pressed for operational funding.

The IRS has promised to “closely review” the report. Hopefully they do so with more attention than they pay to their budget.

--By Doug Hanchar, Esq., Barnes Law

Doug Hanchar is an associate attorney with Barnes Law, licensed to practice law in California.

The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice."

[1] http://www.latimes.com/local/la-me-bell-mayor-jail-20140801-story.html

[2] http://www.dodig.mil/pubs/report_summary.cfm?id=7034

[3] http://www.finance.senate.gov/imo/media/doc/A%20Review%20of%20IRS%20Employee%20Travel.pdf

[4] 5 C.F.R. §301-11.31 (2004)

[5] Treasury Inspector General for Tax Administration, Analysis of Executive Travel Within the Internal Revenue Service, 2013-IE-R007 (July 22, 2013)

[6] https://www.irs.gov/uac/written-testimony-of-commissioner-koskinen-before-the-house-ways-and-means-committee-on-the-2016-filing-season-cybersecurity-and-protecting-taxpayer-information