Nearly 500 IRS Agents Have Pocketed Mysterious Payments From Private Firms: Watchdog Report
A watchdog report indicated that the purported revolving door that connects the Internal Revenue Service and large private firms has been busy.
A report from the Treasury Inspector General for Tax Administration, which was released Tuesday, said that 496 employees received income from either a large accounting firm or corporation “either prior to joining, during their time at, or after leaving the IRS.”
Of those, 241 got paid by a large accounting firm and 255 by a large corporation, according to The Hill.
“Our review found no direct correlation between the employees’ work assignments and the company or firm from which they came or left for in the private sector,” the report said.
“However, our review identified four Office of Chief Counsel non-executive employees who charged time to a private letter ruling in which the taxpayer’s representative was the same large accounting firm that the employee recently worked for before joining the IRS or left the IRS to join. While not a direct correlation, this can raise impartiality concerns,” the report said.
The review said that IRS policies to address potential conflicts of interest “primarily rely on individual self-reporting.”
However, the report warned that “this practice increases the risk for conflicts of interest.”
“For example, the movement of employees in and out of the private sector to public service can increase the risk of conflicts of interest for incoming and outgoing employees and the possibility of undue influence by former or prospective employers that might lead to preferential treatment or create an unfair advantage for specific entities or individuals,” the report said.
The report noted that there are restrictions on what former IRS employees can do after leaving the agency
“The purpose is to prevent an employee from ‘switching sides’ on a matter in which they were involved when employed in a Government agency. However, there are no restrictions that prohibit any former employee, regardless of Government rank or position, from accepting employment with any particular private or public employer,” the report said.
The Hill noted that Democratic Sen. Elizabeth Warren of Massachusetts and Democratic Rep. Pramila Jayapal of Washington asked for the investigation.
“The questions raised by giant accounting firms’ use of the revolving door to benefit their clients falls squarely within your missions to ‘promote economy, efficiency and effectiveness’ and ‘prevent and detect fraud and abuse’ in the programs and operations of the Treasury Department and IRS,” they said.
In its response to the report, the IRS said it needs private expertise to do its job.
“Given the report’s focus on large corporate taxpayers, we note that effective tax administration for this segment of the population necessitates having a highly skilled and experienced workforce that can successfully conduct complex audits of large corporations,” Holly O. Paz, acting commissioner of the tax agency’s large business and international division, wrote, the report said.
A 2021 report by The New York Times indicated that large accounting businesses were already embedded within the IRS.
The Times summarized its findings this way: “Their tax lawyers take senior jobs at the Treasury Department, where they write policies that are frequently favorable to their former corporate clients, often with the expectation that they will soon return to their old employers. The firms welcome them back with loftier titles and higher pay,” the Times wrote.
The outlet added: “From their government posts, many of the industry veterans approved loopholes long exploited by their former firms, gave tax breaks to former clients and rolled back efforts to rein in tax shelters — with enormous impact.”
“The accounting firms have a desire to get in favorable rules for their clients,” Michael Hamersley, a former tax lawyer said. “And the person in the government has a desire to grant their wish because they know they will be rewarded when they get out.”
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