TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Thursday, August 9, 2012

TIGTA: IRS Ordered Agents to Ignore Fraud in Issuing $6.8 Billion in Tax Refunds to Individuals Without Social Security Numbers

TIGTA The Treasury Inspector General for Tax Administration yesterday released Substantial Changes Are Needed to the Individual Taxpayer Identification Number Program to Detect Fraudulent Applications (2012-42-081):

In Calendar Year 1996, the IRS created the Individual Taxpayer Identification Number (ITIN) so that individuals who are not eligible to obtain Social Security Numbers could obtain an identification number for tax purposes.  However, IRS management has not established adequate internal controls to detect and prevent the assignment of an ITIN to individuals submitting questionable applications.  A lack of adequate controls over the processing of ITIN applications can result in the improper assignment of ITINs to individuals who have not substantiated their identity or foreign status, which can result in fraudulent tax returns.  Controls are important because of the volume of returns processed.  In Processing Year 2011, the IRS processed more than 2.9 million ITIN tax returns resulting in tax refunds of $6.8 billion.

This audit was initiated because TIGTA received IRS employee complaints referred from members of Congress alleging that IRS management responsible for overseeing the ITIN operation was encouraging employees to assign ITINs to applicants when the ITIN application was fraudulent.  The objective of our review was to assess the efficiency and effectiveness of the IRS’s process to identify questionable ITIN applications.

TIGTA substantiated many of the allegations set forth in the IRS employees’ complaints.  The complaints alleged that IRS management is not concerned with addressing questionable applications and is interested only in the volume of applications that can be processed, regardless of whether they are fraudulent.

The audit found that the ITIN application review and verification process is so deficient that there is no assurance that ITINs are not being assigned to individuals submitting questionable applications.  Because of lax documentation requirements to obtain an ITIN, tax fraud can go undetected.  Management also eliminated successful processes used to identify questionable ITIN application fraud patterns and schemes.

The IRS also allows Certifying Acceptance Agents to review and verify the identity of individuals applying for an ITIN.  This designation enabled some individuals to commit ITIN application fraud because these individuals do not have to send documentation supporting the application to the IRS.

http://taxprof.typepad.com/taxprof_blog/2012/08/tigta-irs-encouraged-.html

IRS News, Tax | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341c4eab53ef017744028552970d

Listed below are links to weblogs that reference TIGTA: IRS Ordered Agents to Ignore Fraud in Issuing $6.8 Billion in Tax Refunds to Individuals Without Social Security Numbers:

Comments

Hey, it's not like it's real money or anything. Give away all you want, we'll just make more and stick the stupid American public with the bill. Hahahha. It's all about making them debt slaves anyway.

Posted by: Mr. Mojo | Aug 9, 2012 11:41:53 AM

And these are the folks who will be responsible for managing the Obamacare insurance mandates. Honestly, how anyone can vote to keep this administration in power is beyond me. Wait, no it's not. The "gimme" crowd will always vote for more freebies.

Posted by: MochaLite | Aug 10, 2012 12:23:15 PM