Congress last year secured an enormous increase in the IRS’s enforcement budget, with concerns about how these resources will be used against taxpayers placed in the back seat. Advocates of ever-increasing IRS enforcement funds are quick to assure compliant taxpayers that they have nothing to worry about, but these assurances are belied by the IRS’s actions.
The $80 billion budget blowout the IRS received as part of last year’s Inflation Reduction Act (IRA) was tilted heavily towards enforcement funding, prioritizing this over far more needed funding to improve the IRS’s handling of returns and capacity to respond to taxpayer correspondence. Clearly, all this misguided focus on the “tax gap” and enforcement has had an institutional effect on how the IRS looks at taxpayers.
Recently, the IRS announced proposed regulations that would weaken the safeguards against the agency imposing excessive or unwarranted penalties against taxpayers. Even when the checks and balances come from within the agency, the IRS still wants to be able to sidestep them.
Currently, when an IRS agent wants to impose a penalty against a taxpayer, they must first receive approval from their supervisor before doing so. While this by no means guarantees that taxpayers won’t face excessive fines or penalties, it at least provides a layer of protection for taxpayers when overzealous IRS agents seek to gain an advantage over taxpayers in disputes over how much tax a taxpayer should owe.
Instead, these proposed regulations would allow an agent to impose penalties on a taxpayer, inform a taxpayer of the penalty, then receive supervisor approval after the fact. In other words, an agent could impose an entirely unfair and unreasonable penalty, scare a taxpayer into settling their dispute, all without supervisory approval. Even if the taxpayer found out later that the penalty would not have been approved, that would have been little comfort after being intimidated into backing down.
What’s more, the IRS’s proposed regulation also twists the definition of “supervisor” to the point of absurdity. Under the new definition, a “supervisor” is ““any person who, as part of their job, directly approves a penalty of another.” This definition is circular: a supervisor is someone who approves penalties, so to be considered a supervisor able to approve penalties an IRS employee must simply approve a penalty!
As the National Taxpayers Union notes, these proposed changes essentially change the penalty imposition process from “ready, aim, fire” into “fire, aim, ready.” The checks on IRS agents’ authority to impose penalties would be contorted into inconveniences to be circumvented.
That’s frustrating and scary for taxpayers, but it’s an unsurprising result of months of Congress and the President emphasizing enforcement at all costs to the IRS. When an agency is repeatedly told by Congress that it will double its budget in return for more revenue, Congress can’t be surprised when taxpayer rights and protections get left behind. The result has been an overzealous agency that gets slapped down in court, ignores federal regulations, and pushes extreme encroachments on taxpayer privacy.
While the IRS should withdraw these proposed regulations, institutional change can only come from Congress sending a clear signal that it won’t tolerate the IRS ignoring protections for taxpayers. Until then, taxpayers can only expect an increasingly antagonistic and aggressive attitude from the IRS.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.