Part 2: Interal Revenue Service in the United States: Ethics

About the history of the Internal Revenue Service, ethical questions of the IRS, history of problems within the taxing and auditing institution.

Let's Audit the IRS

The IRS operates on manuals and policies that are unavailable to the public. The index to the manual alone is over 1,000 pages, the manual itself has some 40,000 pages, and settlements vary from agent to agent, from city to city and State to State. One can imagine how much the IRS employees absorb of this mountain of data, especially in the Taxpayer Assistance programs where they are trained for an average of 2 weeks (it was one week until 1972). They would have to read some 4,000 pages a day of highly technical materials to be fully informed. To avoid all this they operate under fluid policy called "guidelines." These guidelines are determined by a private, not a governmental, organization called Commerce Clearing House.

The American people were incensed when the news of Watergate broke. Yet in 1968, testimony before the Senate Judiciary Committee on Administrative Practice and Procedure revealed that the IRS has defied court orders, picked locks, stolen records, threatened reputable people, illegally tapped telephones, and opened and read the personal mail of taxpayers. The IRS has denied these accusations yet its manuals are full of such titles as "9141-The Intelligence Mission; 9141.2-Methods to Achieve Intelligence Mission; 9383.5-Electronic or Mechanical Eavesdropping; 9444-Arrests without Warrants; 9452-Searches without Warrants; and 9774.1-Handbook for Special Agents."

Mr. Johnny Walters, a recent commissioner of the IRS and a man who was quick to affirm that he had nothing to do with President Nixon's use of the IRS for political purposes, told the Senate Hearings in 1971 "......I think that all taxpayers and taxpayers' representatives should be treated equally and fairly....." That was in 1971; today there are over 30,000 rulings annually that are kept confidential. Thus certain firms are getting tax breaks that their competitors are not.

In addition, the IRS continues to deny that it has a quota system. Yet testimony before subcommittee hearings on the IRS has shown "close to one million seizures in 1973 or 7 for each minute of each working day." Further, Vincent L. Connery, national president of the National Association of Internal Revenue Employees, said on April 10, 1974: "Hardly a week passes that we do not receive a letter from a revenue officer somewhere in the country complaining about his unmanageable inventory and the pressure-cooker environment created by assigning to him more than he could ever possibly work."

As to the integrity of the IRS in keeping the laws of the country such as the Freedom of Information Act, subcommittee staff director for the Committee on Government William G. Phillips had this to say: "The policies of the Internal Revenue Service in Freedom of Information matters has almost become a national scandal."

Another agency that has tried to encourage some sort of ethical conduct in the IRS is the General Accounting Office (GAO). Robert F. Keller, Deputy Controller General of the U.S. stated: "The Internal Revenue Service is a problem of long standing, Mr. Chairman. GAO's review efforts at the Internal Revenue Service have been materially hampered, and in some cases terminated, because of the continued refusal by IRS to grant GAO access to records necessary to make an effective review of IRS operations and activities. Without access to necessary records GAO cannot effectively evaluate the IRS administration of operations involving billions of dollars in annual gross revenue collections (about $192 billion in fiscal 1971] and millions in appropriated funds [about $978 million in fiscal year 1971]."

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