Previous posts here at Benefitsblog in the last couple of weeks have focused on recent pronouncements and activities at the IRS: “The IRS Scrutinizes Its Own” and “IRS Targeting ‘Abuses of Integrity’.” In the news today, there are more pronouncements from IRS Commissioner Mark Everson as discussed in this article from the New York Times: “I.R.S. to Add to Enforcement by Reducing Its Clerical Staff.” Also, from the Associated Press via Yahoo! News.com: “IRS Job Cuts to Make Way for New Hires.”
Please note the inconsistencies in these reports. The New York Times reports the IRS is cutting 6,700 jobs; the Associated Press reports only 2,400 jobs are being cut. Which is right? The IRS newswire which I received (IR-2004-3) says that the IRS will be (1) closing its Memphis tax return processing operations effective in October, 2005; (2) consolidating its back-office processing for exam, collection and insolvency cases from 92 different locations to four starting in 2005; and (3) reducing agency overhead in internal support functions, particularly through new technology gains in the human resource area, starting in 2005. The newswire goes on to say that the IRS has advised the union that these initiatives involve functions of approximately 6,700 of its 115,000 current employees, but that only about 2,400 employees may be involuntarily separated. The newswire reports that savings from the three initiatives will allow the IRS to fill 2,200 new positions.
As stated in the first part of the newswire, the goal of it all, according to Mr. Everson, is this–to “devote more people to front-line positions and strengthen tax enforcement activities.” (Sounds like they are building a veritable army, doesn’t it?) Also, another part of the newswire says that “[s]avings from these initiatives will allow the IRS to hire more people to pursue cheating by high-income individuals and corporations, continue our attack on abusive tax shelters, bolster our criminal investigation efforts and assist with other enforcement priorities.”
How will all of this affect enforcement in the employee plans arena? Back in October, I reported on how the IRS is shifting its focus to examinations now that the determination letter application program is winding down, following completion by most plans of the GUST amendment process. You can read about it here: “From My Notes: The Mid-Atlantic Pension Liaison Group Meeting.” (This group will meet again at the end of January and updates on any previous information will be reported on then.)
Also, in the news last fall, were reports that the IRS had begun an audit initiative focusing on compensation arrangements for corporate officers, directors and other senior executives.
On a related topic, CCH has some good information today on IRS plan audit policies from Preston Butcher, Employee Plans Examinations Director: “IRS explains on-site plan audit policy.”
Finally, after all of that seriousness, it is time for some IRS audit humor (via the Tax Guru) here and here.