When a defendant pleads guilty or is found guilty of a tax-related crime, the terms of a defendant’s sentence can include various combinations of imprisonment, probation and monetary penalties, such as fines and restitution.

However, the perception has grown that many defendants, despite being convicted of violating the tax laws, are escaping all responsibility for the payment of the taxes associated with the offenses they committed. The overall objective of TIGTA’s review was therefore to determine whether defendants convicted of tax-related crimes are being held to that responsibility.

TIGTA did find that the IRS’s inability to properly account for restitution payments had resulted in the issuance of erroneous refunds, and that, in addition, the IRS’s systems for monitoring defendants’ compliance with the conditions of probation and restitution are neither effective nor reliable. TIGTA also determined that the IRS’s Criminal Investigation (CI) division inconsistently used the refund offset procedure to collect restitution payments.

“If the IRS does not collect the restitution that it is owed by criminals who have been convicted of tax-related crimes, justice has not been served,” said J. Russell George, the TIGTA. “All efforts must be made to collect on the funds due to the American people.”

TIGTA made several recommendations to the Chief of CI to address internal control weaknesses regarding accurate accounting for restitution payments, including preventing the issuance of erroneous refunds.

In addition, TIGTA recommended the establishment of a single database for monitoring defendants, revising guidelines for earlier notification to CI of the status of convicted individuals’ adherence to conditions of probation and restitution, and obtaining the IRS Office of Chief Counsel’s opinion on the use of refund offsets.

In their response to the report, IRS officials agreed with the recommendations and stated that corrective actions are planned or have already been taken to address them.