IRS agents are getting paid by private accounting firms: watchdog

Almost 500 IRS employees have been getting paychecks from big private firms before, during or after their time working for the government, according to the agency’s internal watchdog.

An analysis from the Treasury Inspector General for Tax Administration (TIGTA) released Tuesday found 496 employees who received income from a large accounting firm or corporation “either prior to joining, during their time at, or after leaving the IRS.”

Those IRS employees were from the IRS’s chief counsel’s office, the appeals office, and the large business and international division, which is now in the spotlight as the IRS gears up with new funding to collect more in taxes from wealthy people and big companies.

Of the 496 IRS employees the TIGTA has its eye on, 241 got paid by a large accounting firm and 255 by a large corporation.

The report follows a request by Sen. Elizabeth Warren (D-Mass.) and Rep. Pramila Jayapal (D-Wash.) to look into the “revolving door” between the IRS and the accounting industry.

“As Acting Treasury Inspector General and Treasury Inspector General for Tax Administration, you each already have the statutory power and responsibility to investigate allegations of misconduct with respect to the administration of programs at the Treasury Department and the IRS, including through access to any relevant records and subpoena power,” the members of Congress told the TIGTA.

“The questions raised by giant accounting firms’ use of the revolving door to benefit their clients falls squarely within your missions to ‘promote economy, efficiency and effectiveness’ and ‘prevent and detect fraud and abuse’ in the programs and operations of the Treasury Department and IRS,” they said.

But the metaphor of the “revolving door,” which is used to describe the common practice of technically proficient and well-connected government workers switching to private industry and vice versa, may not provide an accurate image of what’s actually going on at the agency.

Recent reporting by The New York Times has revealed a strategic process of embedding private-sector rule writers within the Treasury to produce government policy that is friendly to big business.

This can result in a long-studied phenomenon known as “regulatory capture,” whereby industries effectively become their own regulators by getting too chummy with the government.

“Their tax lawyers take senior jobs at the Treasury Department, where they write policies that are frequently favorable to their former corporate clients, often with the expectation that they will soon return to their old employers. The firms welcome them back with loftier titles and higher pay,” the Times reported in 2021.

The TIGTA made clear in its Tuesday report it’s aware of this kind of behavior.

“Processes are in place to identify and address potential conflicts of interest in large corporate tax administration,” the agency said.

The IRS responded to the report by saying it needs the expertise of private-sector tax pros to effectively do its job and act on its mandate from Congress to go after wealthy tax cheats.

“Given the report’s focus on large corporate taxpayers, we note that effective tax administration for this segment of the population necessitates having a highly skilled and experienced workforce that can successfully conduct complex audits of large corporations,” Holly O. Paz, acting commissioner of the IRS’s large business and international division, wrote in response to the report.

“In addition to the knowledge and talent that these individuals bring to the IRS, they come to the IRS sensitized to potential conflicts of interest,” she wrote.