Paul L. Caron

Wednesday, December 23, 2009

IRS Has 70% Error Rate in Issuance of Taxpayer ID Numbers, Resulting in Fraudulent Tax Refunds

The Treasury Inspector General for Tax Administration yesterday released Individual Taxpayer Identification Numbers Are Being Issued Without Sufficient Supporting Documentation (2010-40-005):

The Treasury Inspector General for Tax Administration (TIGTA) today publicly released its review of the IRS's processing of applications for Individual Taxpayer Identification Numbers (ITINs).

TIGTA reviewed a sample of ITIN applications and found that almost 70% contained significant errors and/or raised concerns that should have prevented the issuance of an ITIN. The IRS estimates that it has issued more than 14 million ITINs as of December 2008.

ITINs are intended to provide tax identification numbers to resident and nonresident alien individuals who may have U.S. tax reporting or filing obligations but do not qualify for Social Security Numbers, which generally are only issued to U.S. citizens and individuals legally admitted to the U.S. ...

"The number of individual income tax returns filed using ITINs and reporting wage income has increased by 247 percent from 2001 to 2008," commented J. Russell George, the Treasury Inspector General for Tax Administration. "If the IRS continues to issue ITINs without proper verification, the risk of fraudulently filed returns – along with fraudulently claimed refunds – will continue to rise," added Inspector General George.

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Children or parents who have ITINs do not qualify for the earned income tax credit. However, they can qualify for the additional child tax credit, and that's where the incentive for fraud comes in.

Posted by: Claude | Dec 25, 2009 1:32:06 PM

This is the typical way our government runs business and that is the reason they do not need to be involved in healthcare and should be limited to only running the bare essentials for our country. I do not know who is more stupid the elected officals are those of us who elect them. Congress should be cut in half and their powers limited.

Posted by: Justus | Dec 24, 2009 6:36:52 AM

When I went to the IRS to file for SS I was amazed by the hundreds of Mexicans, Chinese, etc in line to get their ITIN numbers. Illegals can get "earned income tax" credit of up to $4500 per year of taxpayer money! IRS has centers all over our country for these "illegals" to file and get taxpayer money - no wonder SS is going broke! A deliberate attempt to break our financial system by the elitists in congress. Wake up America - that's our hard earned money!

Posted by: Carole Hawkins | Dec 24, 2009 4:03:44 AM

Why would you enroll your children with itin#'s or ss#'s If I coould do it over I would not have gotten them numbers. How many people know when you sign a return, you actualy commit perjury, if you dont agree look it up for your self. Don't enslave your children, they dont needs SS#'s, read the Supreme court cases.

Posted by: Bruce | Dec 23, 2009 6:13:31 PM

This sounds about up to par with the progresive agenda of overwhelming the system to crash it to build up their socialism meca. Also, "give the wealth to them" Obama adviser and professed communist Van Jones. We had better wake up soon or it will be too late. This evil will destroy all that our ancestors fought and died for. The sacrafice of many will have been in vain!

Posted by: J Lewis | Dec 23, 2009 6:03:26 PM

sbron is talking out of ignorance at best... legal immigrants are required to obtain ITINs too...

Posted by: setnaffa | Dec 23, 2009 5:21:54 PM

I call Geithner rules.

Posted by: VLS CPA | Dec 23, 2009 3:55:18 PM

So what if they have a 70% error rate?

No one will be fired, no one will be accountable for it, and no one will do anything to correct the problem in the future.

This is how the government works, with absolutely no one being held accountable!

Posted by: Freddy | Dec 23, 2009 2:15:09 PM

ITINs can also be issued to US citizens who have religious or moral objections to a SSN. I have applied for ITINs instead of SSNs for my children because I want them to have the agency to decide whether to enroll in the Social Security System when they are adults. The IRS has rejected my applications twice so I have enlisted my Senator's help.

Posted by: tlockett | Dec 23, 2009 12:58:35 PM

sorry, IRW =IRS

Posted by: j.pickens | Dec 23, 2009 12:21:06 PM

We should require an enhanced auditing regime for the ITN holders.
In my proposed law, the IRW would have to audit tax returns of ITN holders at 20 times the rate of normal SS holders.
This would include domicile address verification by on site reviewers.
If they show up unannounced at the listed address of an ITN holder, and there is insufficient evidence that the person lives there, then all Earned Income Credits, and other refunds would be witheld, and the INS would be notified.

Posted by: j.pickens | Dec 23, 2009 12:20:05 PM

As Glenn Reynolds says, "The country is in the very best of hands."

Posted by: GM | Dec 23, 2009 12:11:52 PM

Every ITIN is issued in error, since every such number is issued to an illegal alien,
typically from Mexico or Central America, who has no business being here.

Since you're in Cincinnati, you should realize that we have terrible unresolved problems
with poverty and social dysfunction among US citizens -- just visit the nearby over-the-Rhine neighborhood. Let's help our own citizens before giving earned income tax credits, free health care and free education to Mexico and Central America's poor.

Posted by: sbron | Dec 23, 2009 12:07:41 PM

I'm not surprised at the error rate, I worked at H&R Block and one of our jobs as tax preparers was to qualify people for those numbers. We had a program that would generate the numbers. I also recall another big tax preparing company that got in trouble because their employees in several cities were generating these numbers in order to file fradulent returns- not returns filed for clients.

Posted by: Carol Christopher | Dec 23, 2009 12:04:24 PM