Key takeaways: an inside look at the IRS and Department of Justice

Before the pandemic hit, the IRS and Department of Justice were taking strides to make the institutions more nimble in an increasingly faster environment. They were creating new task forces to improve cooperation among various divisions, establishing new offices focused on emerging threats and developing tools to streamline processes. COVID-19 put a pause on some of those changes, but not for long.

In Baker Tilly’s recent three-part webinar series, “An inside look at the IRS and Department of Justice,” leadership from both organizations discussed recent challenges and changes as well as where they are setting their sights these days.

The first webinar featured Eric Hylton, commissioner of the small business/self-employed (SB/SE) division at the IRS, and Damon Rowe, executive director of the SB/SE’s newly formed fraud enforcement office.

Hylton, who was formerly the Deputy Chief of the IRS’ criminal investigations (CI) division, said the SB/SE covers 57 million taxpayers, of which the majority file Schedules C, E and F, but it also includes about four million partnerships.

COVID-19 sidelined the SB/SE’s 20,000 employees temporarily as they got their bearings in a remote environment, but as soon as they were able to they started responding to a backlog of taxpayer correspondence.

“We’re looking at relief options and where we can help taxpayers, recognizing the challenges they are facing,” Hylton said.

However, if someone is purposely not meeting their tax obligation, he said, the SB/SE is actively pursuing them. In fact, the division has made finding high-income non-filers a priority. The SB/SE revenue agents and officers along with the office of fraud enforcement are collaborating to find Americans earning more than $100,000 a year who have stopped reporting their taxes or not filed and paid. They are looking in geographic areas, including northern Plains states and other parts of Middle America,that may have been overlooked in past years.

Hylton and Rowe also discussed a few other areas of heightened interest for their teams.

Micro-captive insurance and syndicated conservation easements are at the top of that list, but virtual currencies and COVID-19-related fraud are gaining on traction.

Another emerging threat stems from the financial relief created by government stimulus packages, like the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Soon after the act was signed, Rowe and his office were on the lookout for “promoters” preying on these funds.