Wednesday, February 19, 2014

That Must Call for Doubling Their Bonuses

39% of IRS Employee Long-Term Travel May Not Comply With Tax Rules
The Treasury Inspector General for Tax Administration today released Internal Revenue Service’s Executive Long-Term Taxable Travel (2014-IE-016):

Per the Internal Revenue Code [§ 162(a)(2)] and the Revenue Ruling 93-86, an employee who performs a temporary duty travel assignment exceeding one year at a single or principal location is subject to income taxation of his/her travel expense reimbursements. Compensation for services (including fees, commissions, fringe benefits, and similar items) are includible in gross income. Similarly, remuneration for services paid by the employer to an employee are wages subject to employment taxes, which generally include income tax withholding and the Federal Insurance Contributions Act taxes.

In Fiscal Year (FY) 2011 and FY 2012, there were 351 and 373 executives in the IRS, respectively. In FY 2011, the IRS executives received approximately $4.8 million in travel reimbursements. In FY 2012, executive travel reimbursements decreased to about $4.7 million. We analyzed travel information from the GovTrip and the Integrated Financial System for IRS executives to determine whether executive travel appeared to be long term and met the criteria of long-term taxable travel (LTTT) status. ...

We reviewed the travel records for 31 executives, less than 10 percent of the IRS executives employed, to determine whether their travel appeared to be properly classified as taxable or nontaxable. We found that the tax classification of travel for nine executives appeared to be incorrect based on their travel patterns and the IRS’s validation, and for three executives, the classification was not made in a timely manner as required by Internal Revenue Manual, Taxable Travel Reimbursement.

Consequently, not all executives who were in a LTTT status were correctly and/or timely classified as such; therefore, the IRS did not withhold the appropriate amount of taxes on the travel reimbursements paid to some executives.
Note that we're not talking the small level of "abuses" common in the government travel system, where, for example, employees use their own credit cards to cover travel expenses, for later reimbursement, so that they can collect the frequent travel miles or cash back bonuses on their personal cards, instead of using the government card, for which the government has arranged some kind of kick back to itself. No, here we're talking about abuses of how taxes are collect on the income from long-term executive travel.  How much do you want to bet the errors went in the employees favor?

Just recently the IRS celebrated it's success in suppressing the conservative non-profits with a decision to restore bonuses to the IRS brass. Clearly, they think they're doing it right.

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