IRS Needs Better Oversight of Repayment by Tax Cheats

According to a new Treasury Inspector General for Tax Administration (TIGTA) report - Procedures Are Needed to Improve the Accounting and Monitoring of Restitution Payments to Prevent Erroneous Refunds - the IRS should beef up its internal controls to make sure that those convicted of tax crimes pay up.

"If the IRS does not collect the restitution that it is owed by criminals who have been convicted of tax-related crimes, justice has not been served," said J. Russell George, Treasury Inspector General for Tax Administration. "All efforts must be made to collect on the funds due to the American people."

In fact, the report found that the IRS in some cases wrongly gave refunds totaling about $543,000. IRS officials were unable to properly account for restitution payments or to ensure defendants were following conditions of their probation. TIGTA's analysis of data used to monitor defendants identified inaccurate tax account data totaling approximately $330,000 for twenty-five defendants.

Those who are convicted of tax-related crimes can be required to go to prison, serve probation, pay fines, make restitution, or carry out any combination thereof. The report noted, "However, the perception has grown that many defendants, despite being convicted of violating the tax laws, are escaping all responsibility for the payment of the taxes associated with the offenses they committed."

TIGTA recommended internal control improvements, establishment of a single database for monitoring defendants, revising guidelines for earlier notification to the IRS Criminal Investigation Division of the status of whether convicted individuals' are meeting the conditions of probation and restitution, and obtaining the IRS Office of Chief Counsel's opinion on the use of refund offsets.

The IRS agreed with the recommendations, saying improvements have already been made.