IRS Scandal May Have Other Effects

IRS Scandal Seen Having a Chilling Effect on Audits

Friday, 24 May 2013 09:43 AM

By John Morgan

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The blossoming IRS scandal may be welcomed by Americans who hope to avoid the unblinking eye of the national tax agency, as the last time the IRS was in such a public mess, tax audits fell by 50 percent, according to MarketWatch.

After 1998, when Congressional hearings led to criticism and a reorganization of the IRS, audits subsequently fell to 620,000 in 2000, and the share of taxpayers audited dropped to 0.5 percent from 1 percent.

During that time of reform, IRS employees were wary of being reprimanded for taking enforcement actions, MarketWatch reported.


"People felt constrained and probably let a lot of things go they shouldn't have," said Floyd Williams, a former legislative affairs director at the IRS.

This time around, Congressional scrutiny is compounded by unrelated pay freezes, partial hiring freezes and furloughs brought about by budget cuts and the sequester. The agency told MarketWatch it started 2013 with 7,000 fewer full-time employees than in 2010 and that key enforcement positions have declined 6 percent in the past year.

In testimony before a Congressional panel investigating the agency's treatment of conservative groups Wednesday, Lois Lerner, the IRS official responsible for tax exemptions, pleaded her Fifth Amendment right against self-incrimination.

Lerner would not answer questions about how the IRS developed its list of Tea Party groups to be on the lookout for, what steps she took when she discovered it and why she failed to tell Congress about it when asked directly, USA Today reported.

Lerner said she was following the advice of her attorney, and claimed she had not broken any laws.

However, in written testimony, she said the IRS had targeted not only Tea Party groups, but also "political action type organizations involved in limiting/expanding government, educating on the Constitution and Bill of Rights, social economic reform/movement."

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