Doubling the Size of the IRS Will Have Serious Criminal Justice Implications

The Internal Revenue Service has a long, troubling history of violating taxpayers’ rights during its investigations and abusing its authority. Still, as part of the Democrats’ tax and climate bill, the agency will be doubled in size, receiving $80 billion in additional funding—enough to hire 87,000 new agents and auditors. 

Presumably, many taxpayers will be put in compromising situations. 

In the late 1990s during a congressional hearing, the IRS came under scrutiny for the harsh tactics it used to enforce the tax code. Small business owners told stories of baseless investigations and aggressive raids on their homes/offices based on unreliable informants, ultimately turning their lives upside down. 

During this hearing, Sen. Daniel Patrick Moynihan (D-N.Y.) was horrified: “Wow. We have to be much concerned about the paramilitary performance of the IRS… It’s government violence directed against citizens.”

A 1998 article by the New York Times further described “military style raids” by IRS agents against taxpayers who were accused of nonviolent behavior. 

After these horror stories were brought to the public’s attention, the IRS was mildly downsized and reformed by the Internal Revenue Service Restructuring and Reform Act of 1998. Importantly, the IRS still fails to comply with many of the requirements/constraints on power the 1998 RRA implemented.

Now, Democrats seek to make the IRS larger and more powerful than it has ever been. It is not hard to see how all of these abuses will be exacerbated. 

Further, the IRS Criminal Investigation Division (IRS-CI) regularly violates taxpayers’ rights and skirts or ignores due process requirements when investigating taxpayers for allegedly violating transaction reporting requirements, according to a 2017 report by the Treasury Inspector General for Tax Administration (TIGTA). 

In many cases, IRS-CI had not considered reasonable explanations from those investigated, property owners were not adequately informed of their rights nor informed of seizure of their property, and outcomes in cases lacked consistency, violating the Eighth Amendment to the Constitution. After all of these abuses, TIGTA found that only 8% of investigations actually uncovered violations of tax law. Instead of establishing tax crimes, it appears that many of these investigations were merely IRS-CI fishing expeditions.

Specifically, TIGTA found that in 92% of cases, interviews were conducted after the seizure of the interviewee’s property, oftentimes on the same day. This is important, as judges did not receive any information from interviews before making their probable cause determination. In many cases, with explanations given by property owners, judges’ decisions would have been affected. 

Further, taxpayers under investigation were not adequately informed of pertinent information, such as the purpose of the interview, proper agent identification, and that a seizure of their property took place:

• In 171 of 229 cases, special agents did not properly identify themselves as assistants to the United States Attorneys’ Office (USAO) when they were assisting on an investigation, despite being required to in the Internal Revenue Manual (IRM).
  
• In 106 of 229 cases, the agents did not state the purpose of the interview or TIGTA did not find evidence they did. IRM procedures require special agents to advise the property owner regarding the purpose of the contact. 
  
• In 110 cases, the property owners were not informed until the end of the interview that a seizure took place. In 60 cases, the property owners were not informed that a seizure took place. The IRM requires special agents to advise the property owner regarding a seizure that took place.

Even more concerning, outcomes in cases lacked consistency, suggesting a violation of the Eighth Amendment to the Constitution. 

The Eighth Amendment to the Constitution of the United States, precludes excessive fines and requires that penalties be proportionate to the offense. TIGTA explains that outcomes did not appear to be consistently determined by the facts of the cases but rather by how willing a taxpayer was to engage in costly litigation against the government and the potential of a criminal prosecution if no settlement was reached.

The IRS has a long record of mismanagement and corruption. Rather than being given new responsibilities and a lump sum of money to fund its bad practices, the IRS needs reform.