Treasury secretary says Congress to blame for stepped-up IRS audits

Treasury Secretary Paul O'Neill blamed Congress Wednesday for the disproportionately high rate of working-poor taxpayers that the Internal Revenue Service audits, the Associated Press reported.

O'Neill said the audits of recipients of the earned income tax credit were performed because "we've been directed by Congress to examine the devil out of" such returns. The credit is available to workers whose earnings are so low that they owe little or no taxes, but O'Neill said the complex directions were hard to follow accurately.

"You think I like that?'' he told members of the House Appropriations Committee, regarding the audits. "I hate it."

O'Neill's remarks were noteworthy not only because the IRS is part of the Treasury Department, but because many lawmakers from his own Republican Party pressured the agency to step up its audits of the low-income workers. That came in response to reports concluding high levels of fraud in the earned income tax credit program.

Rep. Anne Northup, R-Ky., said lawmakers favoring the stepped- up audits should not feel "embarrassed or ashamed" for doing so.

The former chief executive officer of Alcoa Inc., has made off-the-cuff comments before that have raised eyebrows and even prompted speculation last year that he might leave the Cabinet. He once called the income tax code "9,500 pages of gibberish" and criticized a tax bill the House GOP had written as "showtime" because it was destined for defeat.

Democrats drew O'Neill into a discussion of the earned income tax credit by referring to IRS statistics showing that a greater proportion of the program's recipients receive tax audits than higher-income Americans.

The returns of nearly one in 50 earned income tax credit recipients are audited, about triple the rate of audits for taxpayers earning at least $100,000.