IRS Auditor neighbor continually asking for favors (including monetary and legal) - is this legal?

Question

To explain briefly - we moved to a new home a little over 3 years ago - our next door neighbors are government auditors. He is an auditor for the IRS, and she does something internal. On our first visit over to their house he made several jokes around the ideas of institutional abuses of power. We have never become friends, but have maintained a neighborly congeniality over the years. Over that time our main source of interaction has been them consistently and repeatedly asking my family and I for many favors. Ranging from the neighborly and entirely reasonable "could you bring in our trashcans", to asking for goods and services that my wife and I provide professionally. The most troubling in my eyes is that her work, which requires security clearance, and her immigration status, require her to have a yearly background check - since the year after we moved in, she has pressured my wife to be her listed social reference for that, and for the last several years, we've complied.

Given their status as auditors, we feel extremely pressured to comply with all of their requests, and are unsure of how to decline these regular and excessive requests.

My main question is - isn't there some sort of regulation or statute that should prevent them engaging in such behavior? Even when I was a nobody $15/hr shift area supervisor for a major shipping company back in the day, my training included a not insignificant portion on avoiding such impropriety.

My follow up question is - if there is something legally inappropriate in what they are doing - how and where can I go about reporting it?

I have tried several internet searches, but thus far anything containing the terms "Report", "IRS", "Agent" and/or "Auditor" tend to be awash in what google deems more relevant information. I have searched, and looked a bit on the IRS website, as well as a few other government sites, but again most of my searches turn up what to do in the case that I am being audited. Thankfully we are not, but that is very much the nature of my concern.

To be clear - this is not a social question. I am not worried about maintaining a social relationship - I feel my family is being implicitly threatened and outrightly taken advantage of. I need to know if I have any legal recourse to stop it.

Answer 1

There is an Ethics Handbook which IRS employees are required to comply with (turns out one of those duties is to comply with OGE Standards, Treasury Supplemental Standards, Treasury Employee Rules of Conduct, and OPM Employee Standards of Conduct, so this is not an exhaustive description). The above-described actions do not clearly constitute a breach of that duty as described in document 12011. They specifically identify a gift prohibition 5 CFR 2635.202(a), the

standards that prohibit an employee from soliciting or accepting any gift from a prohibited source or any gift given because of the employee's official position, unless the item is excluded from the definition of a gift or falls within one of the exceptions set forth in this subpart

This includes meals. However, that does not mean you cannot invite a person to dinner if they work for the IRS, because the gift is given out of friendship, and not because of the person's official position. A person (gift-giver) might be a prohibited person because for example they are "doing business with or trying to do business with the Service". But furthermore, "a person is not considered a prohibited source just because he/she is a taxpayer".

The regulations prohibit soliciting gifts in exchange for "professional favors": but I could wonder, if I don't do this, might they not seek my return and flag it for an audit? It's not clear exactly what discretion an IRS auditor has to trigger an audit, but reportedly, audits are triggered by objectively verifiable facts such as a relationship with an existing audit or a reporting discrepancy. Or, there are random-selection audits. This was studied a couple decades ago. The computational details of random selection are not publically scrutinizable, so we cannot say whether it is literally impossible for an auditor to "put his thumb on the scale" for random audits.

One thing that is certain is that the auditor has the discretion to recommend assessing additional taxes, though of course they can't just make stuff up. But there is a general conflict of interest rule that would say that an agent should not be involved in an action with a close personal friend.