Paul L. Caron
Dean




Tuesday, September 21, 2010

TIGTA: IRS Refuses to Stop Issuing $1 Billion in Erroneous Refund Checks

TIGTA The Treasury Inspector General for Tax Administration today released Better Use of Available Third-Party Data Could Identify and Prevent More Than One Billion Dollars in Potentially Erroneous Refunds (2010-40-062):

The IRS should make better use of the third-party data it receives from employers, government agencies and financial institutions to reduce erroneous refunds, increase revenues and promote voluntary compliance. ... TIGTA found that the IRS:

  • Could make better use of available third-party data to identify and prevent more than $1 billion in potentially erroneous refunds;
  • Does not have a centralized control point for third-party data requested or received from outside sources; and,
  • Lacks a standardized procedure for validating data.

The report also found that additional validation of taxpayer information using third-party data is needed to validate claims for the Earned Income Tax Credit (EITC) and other credits.

"These problems allow a substantial number of erroneous refunds and credits to be granted that are not allowable by law," said J. Russell George, the Treasury Inspector General for Tax Administration. "For example, I am troubled that we found a lack of adequate corrective action by the IRS to address improper claims in the EITC Program, which is particularly vulnerable to fraud."

TIGTA recommended that the IRS freeze refunds for those taxpayers with potentially invalid EITC claims, require valid responses before allowing the EITC claims, and adjust the returns if taxpayers do not respond within a specific time period.

The IRS disagreed with TIGTA's recommendations to freeze potentially invalid refunds and to create a centralized control point for all third-party data.

https://taxprof.typepad.com/taxprof_blog/2010/09/tigta-irs-2.html

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Comments

Why don't we just abolish the IRS and go to a "fair tax"? Seeems like we'd all be better off.

Posted by: Granny | Sep 22, 2010 3:46:16 PM

My son worked at at tax prep place 20 years ago and was aghast at the obvious fraud going on with little enforcement. sounds like same-old-same-old.

Posted by: Whitehall | Sep 22, 2010 9:40:53 AM

EIC is necessarily limited to the lower income brackets. The policy to ignore the data is just a continuation of an overall social policy toward wealth redistribution. Be assured that if the data revealed that an equal amount of money could be extracted in fines from the other end of the spectrum due to even an inadvertent failure to comply to some arbitrary rule; then they would do so post haste... likely to the degree of spending two billon to collect the one billion. It's about ideology, not rule of law.

Posted by: JimmyNashville | Sep 22, 2010 8:11:19 AM

Or we could just have a flat consumption tax and forego all of this nonsense.

Posted by: Steve | Sep 22, 2010 6:19:16 AM

I'm so ready to be rid of the IRS - maybe one of those 'fair taxes' could lose us the only court in the land where one is guilty until proven innocent. Insert your favorite vituperative perjorative here.

Posted by: Bill Johnson | Sep 22, 2010 6:05:21 AM

Shorter version: Despite having access to all the necessary data, the IRS doesn't have a clue what's going on, and isn't particularly interested in finding out.

Posted by: Wind Rider | Sep 22, 2010 5:43:46 AM