PDF - Department of the Treasury

External Attempts to Corrupt
Tax Administration
TIGTA is dedicated to investigating
external attempts to corrupt or interfere
with the administration of internal revenue
laws. Examples of these attempts include
bribes offered by taxpayers to compromise
the integrity of IRS employees, the use of
fraudulent IRS documentation to commit
crimes, impersonation of IRS officials, and
the corruption of IRS programs through
procurement fraud. External attempts to
corrupt tax administration impede the IRS’
ability to collect revenue.
Since April 1, 2005, we have conducted
90 investigations into external attempts to
manipulate or corrupt IRS systems and
operations, and 266 investigations into
external fraud and other related activities.
The IRS continues to place special
emphasis on outsourcing activities
traditionally performed in-house. To
accomplish this goal, the IRS must rely
heavily on contractor support. For
example, the IRS depends on contractor
lockbox facilities to collect 29 percent of
all tax remittances. In Fiscal Year 2004,
the IRS processed more than $237 billion
in tax remittances through various
Government-contracted facilities, all of
which are commercial banking institutions.
TIGTA investigations have identified
numerous incidents of fraud within
contracted lockbox operations.
With the IRS moving toward the
privatization of its debt-collection activities
through contracted Private Collection
Agencies (PCAs), TIGTA anticipates
providing oversight of PCAs using an
investigative model similar to that used
successfully with lockbox operations.
TIGTA’s Procurement Fraud Section (PFS)
within our Special Inquiries and
Intelligence Division (SIID) is committed
to the identification and investigation of
procurement fraud within the IRS. The
PFS achieves its goals through proactive
and reactive investigations, fraud
awareness presentations, investigative
initiatives, data analysis, and liaison.
Agents within the PFS possess the
specialized skills necessary to identify
contract fraud, and to ensure that
individuals and businesses responsible for
such fraud are held accountable.
TIGTA’s Contract Lockbox
Investigations Prove Successful
TIGTA has a great deal of experience
conducting investigations of the lockbox
program and other contract fraud
investigations. Lockbox employees are
contract employees who work for a bank
and have access to Federal tax returns
and Federal tax remittances. From
April 1, 2001, through September 30, 2005,
TIGTA initiated 137 investigations
involving lockbox theft that identified
Theft/Embezzlements of approximately
$4.1 million. Thirty-seven were accepted
for prosecution in Federal and State
courts. At the Pittsburgh (Mellon Bank)
lockbox site, more than 70,000 tax
remittances worth approximately
$1.2 billion (affecting more than 58,000
taxpayers) were lost or destroyed. At the
Richardson (Dallas) lockbox site,
TIGTA’s investigation identified 26 stolen
tax remittances totaling more than
$2.7 million. Previous experience with
lockbox facilities has proven that the
integrity of contract collection services
is vulnerable without the proper
investigative oversight only TIGTA
can provide.
April 1, 2005 to September 30, 2005 29