Policy Analysis No. 222

Why You Can’t Trust the IRS

By Daniel J. Pilla
April 15, 1995

Executive Summary

By the end of this year some 40 million Americans will have had an adversarial confrontation with the Internal Revenue Service. In a rising number of such confrontations, the taxpayer is right, and the IRS is wrong. This study finds that despite a doubling of its budget over the past 10 years and a nearly 20 percent increase in enforcement personnel, the IRS is increasingly incapable of administering and enforcing the nation’s tax law. The following are some of the reasons the IRS can no longer be trusted.

  • The IRS telephone taxpayer assistance program provides about 8.5 million Americans the wrong answers to even the most basic inquiries about the tax laws.
  • This year roughly 10 million Americans will receive correction notices from the IRS assessing about $4 billion. About half of those notices will be erroneous.
  • About 40 percent of the revenues the IRS collects through penalty assessments are abated when citizens challenge the penalties. In 1993 taxpayers were over-charged $5 billion.
  • A General Accounting Office audit of the IRS in 1993 found widespread evidence of financial malfeasance and gross negligence. The IRS could not account for 64 percent of its congressional appropriation.

The IRS fails to meet the standards of financial accountability and diligence that it imposes on the citizenry. Since the IRS can no longer adequately police itself, it can no longer be trusted with the authority to police individual American businesses and taxpayers.

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Daniel J. Pilla is a tax litigation consultant in St. Paul, Minnesota. He is the author of eight self-help books on dealing with the IRS, including How to Fire the IRS (Winning Publications, 1994).