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February 21, 2014

IRS Senior Execs Took Improper Tax Deductions

Career senior executives at the Internal Revenue Service improperly claimed non-taxable revenue on travel expenses, despite receiving adequate instructions from the agency, according to a newly-released audit.

The Treasury Inspector General for Tax Administration said in a report published Tuesday that some IRS executives were not properly classifying their travel as “long-term taxable travel,” or LTTT. When employees travel to a single location for more than one year, or perform their principal duties away from their “official station” for an indefinite amount of time, they are required to pay taxes on any travel-related reimbursements they receive.

To conduct the review, the IG’s office took a sample of 31 IRS senior executives who could have qualified for LTTT in fiscal years 2011 and 2012. The auditors found nine managers -- or about 30 percent -- incorrectly reported their expenses as nontaxable, while three employees did not submit their records in a timely fashion. The average travel reimbursement for these employees was $51,420.

Despite providing guidance to its employees, the IRS must do a better job following up on documentation to ensure compliance, the IG’s office said. “The IRS has established adequate guidance defining when travel is taxable and employees’ and managers’ responsibility to make that determination,” the auditors wrote. “However, the guidance was not consistently followed.”

The IG recommended the IRS chief financial officer inform or remind employees of the policies related to LTTT. IRS officials agreed with the report’s findings and will implement the recommended changes.

Posted by IEC Team Leader in Issues: Travel, Miscellaneous | Permalink