About the Data
Misleading and Inaccurate IRS Data
The information now being provided the public by the Internal Revenue Service about its criminal enforcement activities is substantially misleading and inaccurate, according to an investigation by TRAC.
The evidence for this conclusion is based on a detailed comparison of the IRS data with data produced by two independent institutions -- the federal prosecutors and the federal courts -- that track the same events in the criminal justice process, and the separate discovery of numerous internal inconsistencies in the IRS's own statistics. (See IRS Criminal Enforcement Data Systems.)
The IRS data problems regarding the work of one of its most important components -- the Office of Criminal Investigation -- are not new. In fact, the problems were publicly identified more than fifteen years ago by two expert studies supported by the federal government. One study was completed in 1978 by a panel of the National Academy of Public Administration. The second study, commissioned by the Justice Department in 1980, was written by one of TRAC's co-directors. (Click for full references.)
TRAC's current investigation, however, shows that the critical discrepancies plaguing the IRS in the late 1970s and early 1980s have not been resolved. If anything, TRAC's on-going research shows that the problems have grown worse over time.
The IRS, of course, demands a high level of data accuracy from all taxpayers. Most of the misleading and inaccurate information now being provided the public by the IRS can be found in its annual official report, the Internal Revenue Service Data Book. Here are some examples:
In response to letters to IRS Commissioner Charles O. Rossotti, former Commissioner Margaret Milner Richardson and Attorney General Janet Reno, and followup correspondence with their staffs, both agencies refused to discuss the possible explanations for the misleading and inaccurate information about an important aspect of the government's national enforcement effort. In addition, the IRS refused to provide public information that might have answered some of the outstanding data questions. TRAC's written requests for such meetings -- and the government's numerous refusals -- are attached.
- In every year from 1981 to 1996, the IRS has claimed it sent federal prosecutors fewer criminal referrals than the prosecutors said they have received from the IRS. This same problem was identified by the Justice Department's 1980 study.
- Once the matters reach the courts, however, especially in recent years, the IRS has claimed credit for more work than the prosecutors said the IRS actually had achieved. In 1996, for example, the IRS asserts it was responsible for almost 50% more prosecutions than are recorded by the Justice Department and more than twice the number of individuals sentenced to prison.
- Focusing only on those 1996 criminal prosecutions that resulted in prison when tax fraud was the lead charge, the IRS recorded 720 matters involving such cases. The federal prosecutors and the federal courts, on the other hand, each recorded from all sources less than half that claimed by the IRS -- 277 and 296, respectively.
- Even within the IRS the numbers sometimes have not added up. According to the 1978 study done by the panel of the National Academy of Public Administration, for example, the size of the tax deficiencies recorded by the IRS Criminal Investigation Division was three times the same deficiencies recorded by the IRS Examination Division. The 1980 study discovered that the IRS's Chief Counsel's Office had reported the Criminal Division was referring considerable more matters to it than the IRS Criminal Division recorded sending.