While most people who care about this kind of stuff were focused on Treasury announcing that FinCEN would permanently remove the requirement for US companies to report beneficial ownership information to FinCEN, the Treasury inspector (TIGTA) dropped a short report that spoils its findings in the title: The IRS Did Not Provide Adequate Oversight to Ensure a Drug-Free Workplace [PDF]. Surely you guys have read plenty on the FinCEN news or can get it from more erudite sources than us, let’s talk about drugs instead.
Like all federal agencies, the IRS is required under the The Drug-Free Workplace Act of 1988 to maintain a drug-free workplace. TIGTA says this is especially important for tax administration because it goes without saying, you don’t want a bunch of maniacs on PCP handling taxpayer data.
A DFWP [Drug-Free Workforce Plan] is essential to the IRS in supporting employee health and safety, achieving the agency’s mission, and maintaining a productive workforce. The IRS has an obligation to eliminate illegal drug use from its workforce due to its tax administration responsibilities and the sensitive nature of its work.
We mention PCP because that’s one of the five drugs the IRS is supposed to be regularly testing certain employees for, along with marijuana, cocaine, amphetamines, and opiates. If they can’t tell someone’s on PCP by sight alone they have bigger problems.
Under its own DFWP, the IRS is supposed to be randomly testing 10 percent of employees in sensitive positions like those with security clearances and people who have a work gun (which they call TDP, Testing Designated Positions) and applicants for Criminal Investigation positions when they’ve gotten far enough in the application process to have the job in the bag. Additionally, the IRS is supposed to test employees suspected of drug use…which they didn’t do at all from 2022-2024.
Said TIGTA:
However, frontline managers, in consultation with the HCO [Human Capital Office], did not refer employees for testing when they suspected employees were using drugs. Instead, they contacted our Office of Investigations (OI) to investigate the misconduct. For example, HCO management provided a list of five employees where drug use was suspected in Fiscal Year (FY) 2024; however, testing was not conducted. In addition, from October 2022 through April 2025, OI received investigative referrals for 78 employees based on allegations of illegal drug issues. The fact that these employees were referred to OI suggests management had enough of a concern and should have tested for reasonable suspicion.
These acronyms are getting out of hand.
So basically, instead of sending suspected drug users off to the lab to confirm suspected drug use first, managers fast tracked their suspicions to the Office of Investigations. TIGTA says the DFWP training managers get “does not provide sufficient information about reasonable suspicion testing” and instead only provides “a list of criteria the manager should consider for reasonable suspicion, such as a pattern of abnormal conduct, erratic behavior, or a non-negative test.” This training also “provides a conflicting message” as it tells managers to call OI if an employee snitches on another employee.
OI does not have the authority to drug test employees but they did complete some investigations. TIGTA shared that OI received 78 referrals during the covered period and some of them sound quite serious. We don’t know for sure but we do know this section of the report got the black bar treatment:
Once OI completes its investigation, it provides the results to the employee’s manager, who works with HCO management for final disciplinary determinations. From October 2022 through April 2025, OI received investigative referrals for 78 employees based on allegations of illegal drug issues. According to OI, an investigation should only be initiated if additional information indicates the drug issue occurred on government time, on government property, or was accompanied by other criminal activity (e.g., sale, purchase or possession of drugs on government property). Our analysis of OI’s case management system data identified that OI opened investigative cases for 22 IRS employees based on the 78 referrals for potential drug issues. After completing these investigations, OI referred 11 employees for prosecution; however, the Department of Justice declined to prosecute them. According to OI, the remaining 11 employees were not referred for prosecution because OI did not develop evidence of criminal activity.
For the 11 employees that were referred and subsequently declined for prosecution, IRS management determined the following actions were warranted:
3 employees received disciplinary actions including suspension, reprimand, or written counseling.
3 employees resigned or retired.
For the remaining five employees, management did not take action as follows:
3 employee cases were closed without action or withdrawn.
2 employee cases were closed, but there were no corrective actions documented.
On the random drug testing side, the IRS didn’t meet its 10 percent target, though they came close in 2023.
We get black bars again on the part about retests. Not sure what they were covering up here but we’re dying to know since it’s a paragraph on negative dilute test results. For those of you who don’t know, negative dilute means they suspect the testee drank an obscene amount of water to get the drugs out of their system before the test. It doesn’t always mean there was nefarious intent, only that it’s possible they attempted to get drug concentrations low enough to be undetectable by a drug test by chugging water.
Lastly, TIGTA found that the DFWP manager (DPM) is tracking all of this with spreadsheets, a practice considered suboptimal by GAO internal control standards:
The DPM manually tracks drug testing activities using spreadsheets, email correspondence, and third-party database records. Although the records are maintained in a centralized location, we determined that this centralized location lacks automated controls and continues to rely on manual processes. According to the Government Accountability Office’s Standards for Internal Control in the Federal Government, effective internal controls require management to establish and operate a system that provides reasonable assurance that the organization will achieve its objectives for operations, reporting, and compliance. As it is currently structured, the DFWP does not provide the assurance it is meeting its mission as evidenced by the inaccurate depiction of a drug-free workforce in the ASR [Annual Summary Report] and not meeting the minimum requirement to test 10 percent of the TDP employees.
Full report, along with TIGTA recommendations, can be found here.
Last month we mentioned a study that was done by the Transactional Records Access Clearinghouse (“TRAC”) of Syracuse University that was critical of the IRS’ trend of auditing fewer large corporations and focusing smaller business. A major concern for not only small business owners and managers but also taxpayers since they pay for the audits that are occurring.
Going Concern: What’s the biggest takeaway from the findings on the report?
Dr. Susan Long: The report really does two things: 1) Presents a tool [link to tool] that users can use to look up all sorts of statistics about IRS audits for any size corporation. From very small to very large, you can look at trends over a long time so that you can see how things have changed.
2) The focus of our report was to look at the continuing large drop in corporate audits even though this is a time of rising deficits. The IRS has been given more budget for agent staffing but they have not chosen to focus on the largest corporations even though that’s where, historically, the IRS gets the biggest bang for the buck.
GC: One section of the report discusses the politics of tax collection and deficits. Is the IRS and Treasury taking the wrong approach into obtaining more revenue for the Federal Government?
SL: Our role was not to judge them but to lay out what they do and look for some kind of rationale. We could not find any rationale apart from some kind of a perverse quota system. It certainly does not appear to be at all consistent with focusing where tax dollars are underreported based on their own statistics.
GC: Do you have suggestions or opinions about what the IRS can do better? Is there a way that the Service can improve the quota system or do they need to reassess their strategy altogether?
SL: The role of TRAC is not the typical policy research organization. Our role, as we see it, is to present a picture of what the government, in this case what the IRS, is doing with respect to tax audits and to leave it up to the reader to decide what makes sense.
What we did find is that IRS sets performance goals, as all agencies do, and it sets group targets, not individual targets for agents. But nonetheless they are based on how many total audits of corporations take place for the large and mid-sized industry group (“LMSB”) and then separately for the small and self-employed business unit (“SBSE”). We noticed that there was a peculiar reversal in audit rates when you got to the margin of those companies at say, with the bigger companies for SBSE audits versus what would then be larger companies but represent the small guy for the LMSB auditors. It just showed quite clearly that there was a tendency for each branch to shy away from its biggest audits and put increased efforts on its smaller guys within its unit in a very perverse fashion.
GC: Since you used the IRS’ own data to compile your study does it appear that the statistics could be the result of the flawed goals or quota system?
SL: Right. We’re all human and we respond to what we’re measured on. If those measurements are not in accord with what the priorities are [i.e. where the largest underreporting occurs], you’ll work to the measure rather than to the overall priority. This is not the first report where we’ve noticed this. In this case, what was interesting was that for a long period of time, Congress had been cutting the IRS’ budget and it’s really tough when you have more and more returns and fewer and fewer agents to cover them. You’ve really got hard choices there.
So we were very interested to see, now that we’ve entered a new era, Congress has been giving the IRS more budget for hiring more revenue agents. Therefore they have more discretion about where they will put these additional resources and they are certainly not putting them in the large corporate area.
GC: What about the IRS’ contentions that they audit 100% of companies of $20 billion in assets or more?
SL: According to their figures, the IRS audits more than 100% of all the corporations of that size. These particular figures we took from the IRS databook that is put out annually. There has only been three years where there has been a breakout with these categories.
The first time it came out the IRS said, “yes it’s over 100% but that’s because you can audit more than one year’s return in the same year” and that’s true. But then in the second year it’s over 100% and they make the same excuse. Now this is third year and it’s still over 100% [see footnote at the bottom of the study].
They’re not doing a very good job of accurately measuring that [the number of companies audited] so we presented figures that give the IRS the benefit of the doubt. They’re not measuring the size of the returns vs. the size of the audits in a consistent way, so we just grouped it with the next largest category and saw exactly the same trends in terms of the hours spent auditing the biggest companies.
Simply, there’s a tendency to spend less time on less complicated returns. As companies get bigger their businesses get more complex. When you see that sort of thing in an organization, you look at what are the goals being measured against. If they’re being measured just on quantity and there isn’t any distinguishing between that workload that takes longer to do, it’s easier to up your numbers by choosing workload that you can churn out faster. It’s human nature.
If you’re a bigshot at the IRS there are a lot of things that you don’t have to do. For one, you don’t really have to meet anyone’s expectations. For another, you don’t have to worry about delaying plans just because some practicing CPAs have some silly concerns.
The latest perk of being Doug Shulman? Not having to apologize to anyone.
TaxProf Blog:
The Tax Court yesterday ruled that it lacks jurisdiction to order the IRS to apologize to a taxpayer. Caldwell v. Commissioner, T.C. Summ. Op. 2009-169 (Nov. 18, 2009):
The part of Caldwell’s motion which we characterize as a “Request for Apology” asks that we require the IRS to enter into the record “a written apology to the Petitioner, signed by the Commissioner, Internal Revenue Service” …
…
The IRS objected to the Request for Apology on the ground that Congress has not, through section 7430 (relating to administrative or litigation costs) or otherwise, authorized us to grant such relief. [Fn.3] We agree.
One thought on “The IRS’s Drug-Free Workforce Plan Tested Positive For Low Effort”
Recreational MJ is legal in many states now and (as I understand it) it will test positive up to 30 days later which has rendered preexisting testing regimes difficult. Someone can legally do a couple of joints on a Friday afternoon after work, show up for work on Monday perfectly sober, take a whiz quiz two weeks later and pop positive. How do you go about enforcing this anymore?
Recreational MJ is legal in many states now and (as I understand it) it will test positive up to 30 days later which has rendered preexisting testing regimes difficult. Someone can legally do a couple of joints on a Friday afternoon after work, show up for work on Monday perfectly sober, take a whiz quiz two weeks later and pop positive. How do you go about enforcing this anymore?