IRS Conference Criminality? Tax Man’s Tax Evasion

On May 31, 2013, the Treasury Inspector General for Tax Administration (“TIGDA”) released their report “Review of the August 2010 Small Business/Self-Employed Division’s Conference in Anaheim, California” (“IG Report”).  Thursday, June 6, 2013, the House Oversight Committee held a hearing on this IG report.

It is important to note this is an audit not an investigation.  There is a HUGE difference. An audit relies on information provided and statements made to the TIGDA whereas an investigation would involve TIGDA seizing records and following the paper trail to the truth. This is the same thing TIGDA did with the IRS’ targeting of conservative organizations.  I must ask, why isn’t TIGDA performing investigations? Are they afraid of finding the truth?

TIGTA’s Executive Summary Findings

In the executive summary of their report, the TIGTA found the SB/SE Division of the IRS conducted a conference for an estimated 2,609 SB/SE Division executives and managers at a reported cost of $4.1 million at the Marriott, Hilton, and Sheraton hotels located in Anaheim, California. They also determined that the IRS used two  event planners instead of available internal personnel to assist in searching for the most cost-effective location.  Finally, TIGTA also identified other questionable expenses related to the conference including planning trips, outside speakers, video productions, an information corridor, and promotional items and gifts for IRS employees.

Continuing Education Credits

According to the IG’s report, the purpose of the conference was to provide continuing education for the Managers in the Small Business/Self-Employed division at an estimated cost of $4.3 million.  In fact, 24 continuing education credits were awarded to each with ZERO proof that even one session was attended.  So I must ask three important questions. First, why are taxpayers paying for continuing education for government employees?  Maintaining their licensures should be a condition of employment.  Second, how much are taxpayers spending annually across all government agencies for continuing education? This should be the first area cut within all budgets.  Third, why were they not required to provide evidence that the training sessions were actually attended?  If these individuals are attorneys or certified public accountants, investigation by the appropriate governing boards should be commenced immediately and their licenses suspended or revoked.

Startling Recommendation and Darrell Issa’s Response

There was one startling TIGTA recommendation: “ensure that taxable travel is identified and Forms W-2, Wage and Tax Statement, are issued to applicable employees.”

So the IRS is charged with enforcing that American taxpayers report all income and pay all associated federal income taxes on that income but it appears there is a different standard for IRS employees.  Why are these employees not identified, charged and arrested for tax evasion?  Just because the IRS did not report this income on the employees’ respective W-2s, does not alleviate the employees’ responsibility to self-report on their income tax return and pay the required federal income taxes.

Representative Darrell Issa, Chairman of the Oversight Committee, specifically addressed this in his opening statement of last Thursday’s hearing.

“Today, more than any other hearing, we revisit the kind of waste and the kind of failure to secure taxpayers’ hard-earned money that I can remember in history…But to find out that not only does the IRS take your money, not give you proper answers and then when it comes to tens of millions of dollars use it in a way that is at best maliciously self-indulgent.  To spend more than you would have spent by normal negotiations for rooms is unthinkable for any agency but when it’s the IRS and they give to their own employees benefits such as to local employees in Anaheim and then fail to file W-2s for that income, the IRS effectively was guilty of tax evasion.  And saying you don’t know doesn’t help you, doesn’t give you an out as a taxpayer, it certainly shouldn’t give the IRS an out when they’re using taxpayers’ money.”

TIGTA Report Nuggets

The 63-page TIGTA report contains several nuggets of interest to American taxpayers, demonstrating how our hard-earned monies are being squandered by the IRS, an agency under scrutiny for both targeting conservative nonprofit applications and failing and refusing to timely process applications.  Many Democrat members of Congress blamed budget constraints.  Well, here are examples of how the IRS spent their budget.

IRS-Sponsored Conferences and Trainings

*  March 2010, 721 IRS employees, SB/SE Division Collection Leadership CPE, San Diego, CA, $1.2 million
*  August 2010, 2,113 IRS employees, TAS Technical Training Symposium, Philadelphia, PA, $2.9 million
*  August 2010, 2,609 IRS employees, SB/SE Division All Managers Continuing Professional Education (CPE), Anaheim, CA, $4.1 million

Funds Utilized

*  2010 budget authorized 1,315 new employees, yet 1,516 were hired
*  1,516 new employees were not employed all year so extra $3.2 million was transferred to conference budget

Planning Trips

*  November 2009 planning trip by 3 IRS employees, cost $3,500
*  June 2010 planning trip by 8 IRS employees, cost $10,300
*  August 2010 planning trip by 16 IRS employees, cost $22,000

Outside Speakers

*  15 speakers, cost $135,350, 13 sole-source (no bidding)
*  1st keynote speaker paid $17,000 (for two one-hour sessions) for “painting”
*  2nd keynote speaker paid $27,500 (for two one-hour sessions and his first-class travel arrangements) “who shared how seemingly random combinations of ideas can drive radical innovations”

Videos

*  “Leading Into the Future” Star Trek video (5 minutes, 40 seconds, 62 staff hours at $50/hour for that pay grade) and SB/SE Shuffle video (2 minutes, 52 seconds)
*  Cost $50, 187; however, no receipts were provided to support costs

Hotel Upgrades

*  132 room upgrades, conveniently included in the letter of intent, a way to avoid gift taxes assessed to IRS employees (IRS would know exactly how to avoid these taxes)
*  10 complimentary rooms were received and used by outside speakers
*  38 local IRS employees stayed in hotels, received daily meal per diems (taxable but not included on W-2s)

Meals and Alcohol Received in Addition to Daily Per Diems

*  Taxpayers paid for alcoholic beverages
*  IRS employees received daily meal per diem even though continental breakfast was included with room and other meals were provided

Exhibitor Hall and Promotional Gift Expenses

* 41 booths staffed by IRS and non-IRS
*  24 tickets to two Los Angeles Angels baseball games (12 tickets per game) were used as contest prizes
*  Numerous gifts/trinkets were provided to attendees at an estimated cost of more than $64,000

Miscellaneous

*  IRS did not retain receipts to support conference expenditures
*  Almost 200 IRS employees did not report proper travel costs
*  2,609 slated to attend at $3,752,000 in travel ($1,438/ea) when in actuality 2,547 attended at cost of $3,8450,000 ($1,510/ea)
*  2 outside event planners were used rather than government employees responsible to provide those services, there was no contract with the event planners yet they issued Requests for Proposals on behalf of the government
*  Event planners received 5% commission from the hotels, thus they were incentivized to ensure the costs were as high as possible
*  The IRS also rented approximately 2,800 automated (audience) response tools at a cost of $24,828

Recommendations

The IG’s recommendations focused on policy and procedure development. This is utter nonsense and rises to the level of absurdity, especially in light of the 10, yes 10 people from the IG’s office involved in the “audit”.

The IRS has been in existence for over 100 years. They are subject to annual audit by the General Accounting Office.

Unanswered Questions

Why are government employees receiving bonuses for doing their jobs?  Who is receiving frequent flyer miles when government employees travel?  Why are governmental employees traveling rather than using technology for meetings?  Why did the IRS conveniently misplace the documentation supporting why government facilities were insufficient for the conference?  What is the relationship between the outside event planners and IRS administration and/or the Obama campaign and/or the Obama administration?  What “booths” were in the Exhibit Hall and who were the non-IRS employees that were staffing them?  The IG report does not mention whether or not the keynote speakers or other outside speakers provided documentation to support their right to work in the United States and whether or not Form 1099’s were issued for income tax reporting purposes.

Sandy @Orangeone4

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