Report: Watchdog Finds Accounting Firms Paying IRS Agents

Large accounting firms and corporations have paid almost 500 Internal Revenue Service agents before, during, or after federal employment, the agency’s internal watchdog found.

The Hill reported Tuesday that an analysis released by the Treasury Inspector General for Tax Administration found 496 receiving incomes from private accounting firms and corporations “either prior to joining, during their time at, or after leaving the IRS.”

According to the report, the IRS employees involved came from the chief counsel’s office, the appeals office, and the agency’s large business and international division. They included 255 paid by big corporations and 241 by large accounting firms.

Sen. Elizabeth Warren, D-Mass., and Rep. Pramila Jayapal, D-Wash., requested the agency to investigate the “revolving door” between the IRS and private businesses in 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,” they told the watchdog. “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.”

But instead of the traditional path to use government service as a way into or a parachute after employment in each industry, a 2021 New York Times report said people inside the industry had moved to federal employment to help pass policies and regulations favorable to those same firms.

“The accounting firms have a desire to get in favorable rules for their clients,” former EY and KPMG tax lawyer Michael Hamersley told the Times in 2021. “And the person in the government has a desire to grant their wish because they know they will be rewarded when they get out.”

The inspector general said in Tuesday’s report that it is aware of these practices and that “policies are in place” to deal with such conflicts of interest.

In a statement to The Hill, the IRS said the agency needs to use the expertise of these private-sector tax pros to go after “wealthy tax cheats” and enact the mandates from Congress.

“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’ 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.”