Who Audits the IRS? The Agencies That Provide Oversight

The Internal Revenue Service (IRS), the nation’s tax collection agency, operates under scrutiny to ensure its power is not misused. The agency handles trillions of dollars in revenue and possesses sensitive financial information for nearly every American, making its accountability a subject of public interest. Multiple independent bodies and congressional actions provide oversight of the IRS’s operations, finances, and interactions with taxpayers. These reviews are designed to promote fairness, efficiency, and adherence to the law.

The Government Accountability Office

The Government Accountability Office (GAO) serves as a primary auditor of the IRS, functioning as an independent, non-partisan agency that reports directly to Congress. The GAO’s most significant responsibility is its legal mandate to conduct a full financial statement audit of the agency each year. For perspective, the IRS collected approximately $4.7 trillion and paid out over $650 billion in refunds and credits in fiscal year 2023.

A financial statement audit involves a detailed examination of the IRS’s books and records. GAO auditors verify that the agency’s financial statements—which report its assets, liabilities, revenues, and expenses—are presented fairly and accurately. The audit also assesses whether the IRS has effective internal controls over its financial reporting to prevent errors and fraud. The results of these annual audits are compiled into a public report delivered to Congress.

For instance, past GAO audits have pointed to persistent deficiencies in the systems the IRS uses to account for unpaid taxes receivable. While these issues have not prevented the GAO from issuing an unmodified, or “clean,” opinion on the overall financial statements, they highlight areas requiring management attention. These findings ensure the public and Congress are aware of the agency’s operational challenges and financial stewardship.

The Treasury Inspector General for Tax Administration

A more focused form of oversight is provided by the Treasury Inspector General for Tax Administration (TIGTA). Established by the IRS Restructuring and Reform Act of 1998, TIGTA is an independent office within the Department of the Treasury created to oversee IRS activities. Unlike the GAO, which has a government-wide scope, TIGTA’s mission is dedicated exclusively to the nation’s tax administration system.

TIGTA conducts performance audits to evaluate how efficiently and effectively IRS programs are running. These audits might examine anything from the processing of paper versus electronic tax returns to the effectiveness of taxpayer service call centers. The goal is to identify waste, recommend operational improvements, and ensure the IRS is meeting its service objectives.

Another function is investigating allegations of misconduct by IRS employees. TIGTA’s Office of Investigations looks into criminal violations and serious administrative misconduct, protecting the integrity of the tax system. This includes investigating attempts by outside parties to bribe or threaten IRS personnel as well as internal issues like extortion. TIGTA also safeguards taxpayer rights by auditing how well the IRS adheres to fair treatment standards, such as those in the Taxpayer Bill of Rights.

TIGTA regularly publishes its findings in detailed reports that are accessible to the public. For example, a report might analyze the security of taxpayer data stored on IRS computer systems or review procedures for addressing tax-related identity theft. These reports provide specific recommendations to IRS management to correct deficiencies.

The Role of Congressional Committees

The audit reports from the GAO and TIGTA serve as foundational documents for congressional oversight. Accountability for the IRS rests with Congress, which uses these independent findings to inform its legislative and oversight responsibilities. This function is carried out by specific committees with jurisdiction over the Treasury Department and federal tax policy.

The two most prominent committees in this process are the House Committee on Ways and Means and the Senate Committee on Finance. These committees receive the audit reports and use them to prepare for oversight hearings. During these public hearings, the IRS Commissioner and other senior officials must answer to members of Congress about the issues identified by the auditors.

Lawmakers can question IRS leadership on why certain problems persist, what corrective actions are being taken, and how the agency plans to implement the recommendations from the GAO and TIGTA. The information gathered in these hearings can influence decisions about the IRS’s annual budget appropriation or lead to formal directives for operational changes.

In some cases, the problems uncovered by audits and explored in hearings may reveal gaps or flaws in existing law. This can prompt Congress to draft and pass new legislation. For example, if audits show that taxpayers are struggling with a particular provision of the tax code, these committees might propose a legislative fix. This ensures the oversight process holds the agency accountable and drives improvements in tax law.