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IRS audit thyself: lack of documentation, doubtful expenses

The tables have been turned at the IRS. The agency responsible for scrutinizing taxpayers' compliance with the tax code has itself come in for sharp scrutiny. This week came the news that an audit of the agency responsible for federal tax audits has found some highly questionable spending.

The audit was conducted by the Treasury Inspector General for Tax Administration (TIGTA). It found, for example, that in 2010 the IRS spent more than $4 million on a single conference.

For taxpayers in Southern California and across the country, such spending raises more doubts about the management of the IRS. After all, the agency is already reeling from disclosures that it targeted certain conservative groups for heightened reviews of applications for tax-exempt status.

As the Treasury Department's inspector general noted, the seemingly lavish spending on conferences by the IRS is at odds with pressing need for fiscal austerity. In recent years, the IRS has cut back on hiring and reduced its workforce. This year, it has responded to across-the-board federal budget cuts by reducing its services to taxpayers.

The 2010 conference that cost the IRS more than $4 million is an especially doubtful use of the agency's limited resources. The bulk of the money for the conference came from funds that had originally been intended for hiring.

The Small Business / Self-Employed division of the IRS sponsored the conference, with the stated purpose of training. About 2,600 people attended, spread over three hotels in Anaheim, California.

But the TIGTA audit found that none of the IRS attendees were required to provide documentation of their participation in the training sessions. The inconsistency of this is obvious, given the usual insistence by the IRS that taxpayers document virtually everything.

In short, the agency responsible for federal tax audits is finding out how uncomfortable it can be on the other side of an audit.

Source: CNN, "Report shows lavish spending at IRS conference," Dana Bash and Ashley Killough, June 4, 2013