The Internal Revenue Service may have scandalously denied tax-exempt status to conservative political action groups, which may have tilted the 2012 president election unfairly in Barack Obama’s favor. But at least the tax agency has done a job beyond reproach in all other respects, right?
Well, not entirely. CBS News has a summary of an inspector general’s report that the IRS issued $4 billion in fraudulent tax refunds last year to people using stolen identities. To add insult to injury, some of the money went to addresses in Bulgaria, Lithuania, and Ireland, with 655 refunds going to a single address in Lithuania.
The report, authored by J. Russell George, noted that thieves are getting more aggressive, adding:
Identity theft continues to be a serious problem with devastating consequences for taxpayers and an enormous impact on tax administration. [The fraud] erodes taxpayer confidence in the federal tax system.
Some specifics:
- Last year, the IRS issued 1.1 million refunds to people using stolen Social Security numbers. Those refunds totaled $3.6 billion.
- The IRS issued another 141,000 refunds to people using stolen taxpayer identification numbers, which are typically used by foreign citizens who earn money in the U.S. Those refunds totaled $385 million.
- Florida, a hotbed of fraud because of its large elderly population, witnessed 38,000 potentially fraudulent refunds, totaling $147 million, mailed to addresses in Miami, and 580 refunds totaling $870,000 going to addresses in Orlando.
The CBS article gives the IRS credit for its efforts to put a stop to identity theft, noting for example that in 2011, the agency issued $5.2 billion in refunds to people with stolen Social Security numbers. Compare with the $3.6 billion doled out to fakers last year, that does represent progress. But as Bill Nelson, a Senate Democrat from Florida, points out:
While these reports show that some progress is being made in reducing tax fraud, it’s also clear that there is still much to be done and there are still a number of improvements that need to be made to protect both taxpayers and the U.S. Treasury.
Nelson has accordingly introduced a bill that would toughen criminal penalties for people who file fake tax returns under someone else’s name. But for an agency that has a lot of explaining to do, the IRS wins no sympathy for failing to weed out the bad guys — both outside and insider the agency.
