IRS can’t keep its own books straight, investigators find

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If an IRS agent shows up at your door claiming you owe money to Uncle Sam, he or she could be wrong.

A new audit finds the IRS still has problems keeping track of what is owed by Americans. The problem persists because the agency’s database still has errors in it, the Government Accountability Office said.

“Errors that caused inaccurate tax records in some cases also resulted in IRS erroneously billing taxpayers for amounts that were not valid, thus placing an undue burden on taxpayers who were compelled to prove that IRS was in error,” the GAO said in a report released this month.

For instance, the IRS recorded one taxpayer as having an income of $99 million, though taxpayer’s actual income on his tax forms was $9.9 million. And another American was listed in 2012 as still owing back taxes when his case, in fact, had been settled by a bankruptcy court in 2006. 

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    The IRS declined comment when questioned by the Washington Guardian. But in a statement to the GAO, the tax agency said it “accurately accounts for approximately $2.5 trillion in tax revenue receipts, $373 billion in tax refunds and $12 billion in IRS appropriated funds.”

    “While challenges remain, the IRS has established its ability to consistently produce accurate and reliable financial statements,” said Douglas Shulman, the head of the nation’s tax agency.  “The IRS is dedicated to continuing to improve financial management and internal controls.”

    GAO, the watchdog arm of Congress, conducted an extensive review of the Internal Revenue Service’s financial statements during the 2011 and 2012 fiscal years.  The auditor found the IRS tracks its own money just fine. The problems stem from records it keeps on what taxpayers owe, especially in the case of delinquent taxes.

    GAO expressed concern that the IRS’s own internal controls failed to detect the problems, and that sloppy bookkeeping has been flagged before.  And it’s worried that inaccurate information on tax accounts could misinform future IRS financial statements and revenue projections.

    “Based on our recommendations, IRS has taken actions over the years to improve controls over its unpaid tax assessments subsidiary ledger; however, IRS’s progress to date has not been effective at fully addressing all the issues that continue to cause a lack of transaction traceability and material inaccuracies,” investigators said.

    Another challenge lies on the horizon for the IRS: combatting identity theft.  The GAO reported the tax agency identified and prevented $8 billion being paid to fraudulent and criminal claims, and has already stopped more than $9 billion this year.  But investigators said its hard to know just how much fraud is slipping past the government’s watchful eyes.

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