Democrats put IRS in spotlight after audits

Democrats are putting pressure on the IRS to explain why two foes of the Trump administration were selected for a rare and intensive type of audit after being fired from their government posts. The chief tax-writing House Ways and Means Committee will question Trump-appointed IRS Commissioner Charles Rettig on Thursday afternoon, three House sources said, about how these seemingly punitive audits were performed by an agency that’s not supposed to be used for political purposes. 

Former FBI Director James Comey and Deputy Director Andrew McCabe were audited following their dismissals as part of the National Research Program (NRP), an IRS program in which taxpayers receive line-by-line scrutiny of their tax returns and have to engage in intensive back-and-forth with the IRS. 

Speculation is growing on Capitol Hill that these audits were administered as punishment for disloyalty to former President Trump. 

“The politics here are a lot dicier than you would think,” a House source told The Hill. “Commissioner Rettig is cordial and solicitous, very solicitous of Congress. We haven’t seen a heavy outcry yet about this really from Democrats or Republicans, but it’s a major story.” 

A Democratic House aide told The Hill he expects “Commissioner Rettig will field questions on last week’s news on the Comey/McCabe audits.” 

Republicans have also supported an investigation into political targeting at the IRS but have come to the defense of Rettig, who was appointed by a Republican administration. 

“Commissioner Rettig has stated unequivocally he has had no communication with President Trump, and the research audits are statistically generated,” Ways and Means ranking member Kevin Brady (R-Texas) said in a statement last week. “He has referred this issue to the Treasury Inspector General for Tax Administration, and I support investigating all allegations of political targeting — consistent with the precedent set by the House Ways and Committee when investigating President Obama’s disgraced former IRS director Lois Lerner, who the committee confirmed had engaged in this abuse.” 

The IRS describes NRP audits as helping the agency “identify where compliance problems occur,” while tax attorneys describe them as extraordinarily intrusive. 

“NRP audits are very, very intrusive,” Steven Goldburd, a tax partner at law firm Goldburd McCone who is currently working on two NRP audits, said in an interview. “For example, when you go to your accountant and they say give me proof of your child, you can just give them a Social Security number. But with an NRP audit, the IRS will ask to see their most recent report card.” 

“Could this be targeted? Sure. There are all kinds of ways that the IRS determines who to audit,” Goldburd added. “Someone lives a certain kind of lifestyle that’s not consistent with their tax returns? That’s a way to get audited. Using whole-number estimates on your expenses — $30,000 for a house payment, $2,500 for an auto payment — that’s a good way to get audited right off the bat, because you’re supposed to be using accurate figures.” 

“The DIF score used by the IRS computer? These are algorithms that are secret,” Goldburd said, referring to a computer program used by the IRS that assigns each tax return a probability that it has left some income undeclared. 

The IRS keeps the algorithms it uses to pick taxpayers out for audits secret in order to discourage tax cheats and make sure people can’t game the system. 

While individuals can be targeted for audits based on their returns, a former senior IRS official pooh-poohed the notion that the NRP could be used as a political weapon. 

“There are embedded triggers in the system for regular targeted audits, but this isn’t like that at all,” the former official said. “This is like a jury duty service.” 

“There are geographic thresholds, income thresholds, and the computer spits out candidates,” the former official continued. Referring to an entry-level IRS agent, they said, “Is it possible that some GS-7 could have substituted a name? I would think that the IG [inspector general] would be able to pull that. There are protections in place against shenanigans like that. If you sit there and look up what Brad Pitt made in a given year, you’re going to be fired.” 

Still, the former official said that “this crap happens on occasion. Remember the Paula Jones audit?” 

Paula Jones was a former state employee of Arkansas who sued former President Clinton for sexual harassment and also found herself the target of an audit from the IRS. There was similar speculation at the time that the audit had been political retaliation for making trouble. 

Former FBI officials Comey and McCabe drew Trump’s ire during the FBI’s probe into possible relationships between the Russian government and Trump’s 2016 campaign team. Comey pushed ahead with the investigation, and Trump said his firing was in light of “this Russia thing.” 

McCabe took over for Comey as acting director of the FBI and was fired by Attorney General Jeff Sessions in 2018. He became a vocal critic of the Trump administration after he was fired and stripped of his pension, before he later sued to win it back. 

“Commissioner Rettig always welcomes a chance to meet with members on tax issues and routinely flags areas of potential concern for key leaders of congressional oversight committees,” IRS spokesperson Jodie Reynolds said in a statement. “Commissioner Rettig also personally reached out to TIGTA [the Treasury Inspector General for Tax Administration] after receiving a press inquiry last week.” 

The NRP audits of Comey and McCabe were first reported by The New York Times.