IRS Cannot Handle Fraudulent Tax Returns

August 3, 2012 Taxation in USA

Tax Fraudsters Will Con 21 Million From IRSWASHINGTON D.C. – The US Internal Revenue Service does not have the capability of detecting and addressing all of the fraudulent tax refunds submitted, and the situation leads to billions of dollars being paid out as a result of fake tax returns.

On August 2nd the US Treasury Inspector General for Tax Administration (TIGTA) released a report on the Internal Revenue Service’s (IRS) ability to detect tax fraud, showing that there are still significant shortfalls in the Service’s processes, and concluding that over the next five years an estimated USD 21 billion of tax refunds will be wrongly issued as a result of identity theft.

According to TIGTA, identity theft is an exponentially growing problem which reduces government revenues, raises operational costs for the IRS, and erodes taxpayers’ confidence in the country’s tax system.

The IRS claims that last year it detected and addressed approximately 940 000 fraudulent tax returns with cumulative claims of USD 6.5 billion. However, TIGTA estimates that an additional 1.5 million cases of tax fraud were processed by the IRS without being detected.

The TIGTA investigation uncovered evidence of 2 137 suspicious tax return which were filed from one mailing address and received a total of USD 3.3 million in refunds. The audit also revealed that the IRS has failed to detect that 590 separate tax refunds with a total of over USD 900 000 were deposited into one bank account.

Explaining the IRSs’ inability to detect such significant cases of tax fraud, the Inspector General of TIGTA J. Russell George said that the most significant cause behind the was the Service’s inability to detect fraudulent tax returns was a lack of access and ability to process third-party information about taxpayers. He also noted that the IRS currently has limited powers to recover tax refunds which were mistakenly paid out as a result of fraudulent tax refunds.

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