“Scrap the Code” advocates see audit as further proof that America needs tax simplification.
The Government Accounting Office (GAO) testified before Congress February 29 to deliver a stunning report on its 1999 audit of the Internal Revenue Service (IRS). The GAO concludes, “serious internal control issues continued to affect IRS’ management of unpaid assessments.”
According to the audit, “in one case, it took 18 months for IRS to correct an input error that resulted in an erroneous assessment of over $160,000 against a taxpayer who was actually due a refund.”
In the age of cyber hackers, the reported issued a chilling warning: “If the IRS does not adequately mitigate these weaknesses, unauthorized individuals could gain access to critical hardware and software where they may intentionally or inadvertently add, alter, or delete sensitive data or computer programs. These individuals could also obtain personal taxpayer information and use it to commit financial crimes using taxpayer names, such as fraudulently establishing credit and running up debts.”
Clearly, the IRS cannot manage a 44,000 page tax code with five separate marginal rates and hundreds of rules based on age, marital status, consumption habits, and investment decisions.
In fact, the IRS cannot even manage its own books. According to the audit, the “IRS was unable to reconcile its administrative fund balance with Treasury accounts throughout fiscal year 1999. Such reconciliations are required by Treasury policy and are analogous to companies or individuals reconciling their checkbooks to monthly bank statements.”