IRS Flunks Audit

Widespread Problems at Tax-Collecting Agency


ABC News
ABCNEWS Correspondent Jackie Judd
March 1, 1999


W A S H I N G T O N, March 1 - Just as millions of Americans struggle to meet the strict reporting standards set by the Internal Revenue Service, the tax-collecting agency itself has failed a federal audit.


The General Accounting Office today slammed the IRS for poor bookkeeping, paying out fraudulent refunds and leaving holes in computer security that may let outsiders ``access, alter or abuse'' taxpayer information.


Most significantly, the amount of money the IRS has failed to collect has reached a whopping $222 billion dollars - the same amount of money we spend every year on Medicare.


Most of it will never be collected, because it is owed by either bankrupt companies, failed savings and loans, individuals who are missing, or dead - or just plain deadbeats.


Congressman Blasts IRS


The litany of IRS failures was aired at a hearing today on Capitol Hill, drawing sharp criticism from lawmakers.


"I think the stockholders, the taxpayers, have every reason to demand a dramatic and immediate change and that includes debt collection," said Rep. Steve Horn, R-Calif., chairman of the government management subcommittee.


Debt collection was not the only problem found by the GAO. The IRS essentially failed the same sort of audit it forces upon taxpayers.


"Think of this as not balancing your monthly checkbook to the monthly bank statement," said GAO auditor Gregory Kutz, "and at the same time having a record-keeping system that was prone to error."


Shoddy Filing System


In some cases, the GAO said, the IRS had no record- keeping system at all. The IRS could not provide a list of what it owed outside vendors - such as utility companies that supply power to field offices.


Also, the IRS lost track of its own property. While some items may have been lost to theft, others simply could not be accounted for.


"We noted a missing Chevy Blazer, laptop computer and $300,000 printer," Kutz told lawmakers. "At one IRS field office, 19 of 130 computer assets over $50,000 each could not be located."


The IRS blamed antiquated computer systems for many of the snafus and asked for the same thing that many anxious taxpayers want: more time to fix the problem.