Tags: IRS | fraud | Johnson | tax

IRS Accused By Congressman Of Being an ‘Accomplice to Tax Fraud’

By    |   Monday, 13 August 2012 10:25 AM

The Internal Revenue Service is accused by Rep. Sam Johnson, R-Texas, as being a "willing accomplice to tax fraud."

That wouldn’t normally be believable — totally incredible — were it not for a new report by the Treasury Inspector General for Tax Administration.

The report sums up the investigation on why the IRS failed to detect fraud in the issuance of individual taxpayer identification numbers (ITINs).

This fraud facilitated thousands of fraudulent tax returns being filed and literally millions of dollars, if not more, of your tax money being paid out.

The audit of the IRS by the Inspector General started with complaints by IRS employees that management was encouraging employees to assign applicants ITINs even though the applications were fraudulent.

The Inspector General was quite candid in concluding that many of the IRS employees’ complaints were substantiated.

The reports states that IRS management has:

• Created an environment that discourages tax examiners responsible for reviewing ITIN applications from identifying questionable applications.
• Eliminated successful processes used to identify questionable ITIN fraud patterns and schemes.
• Established processes and procedures that are inadequate to verify each applicant's identity and foreign status.

The Inspector General's report also found that management has not developed internal controls to detect and prevent this ITIN problem.

That is not all.

The report also found that IRS management accepted documents that did not allow for further verification.

All of which then enables individuals to use these ITINs to file tax returns to "commit tax refund fraud."

The complaints actually made by the IRS employees are even more condemning.

This problem with IRS management is nothing new. Some of the deficiencies were brought to management's attention long ago, as a September 2002 report by an IRS-initiated Task Force also raised some of these deficiencies.

What did IRS management do?

It appears that instead of fixing those deficiencies or dealing with their own employees’ complaints, management seemingly went out of their way to do quite the opposite.

The appendix to the report contains the "Management's Response to the Draft Report," which is, as would be expected, a thank you to the Inspector General, a claim that changes were implemented earlier this year and a statement that it is in the process of “implementing and evaluating” each of the Inspector General's specific recommendations.

When asked to comment on the report, Sen. Chuck Grassley, R-Iowa, said, "It's hard to see why the IRS would sanction overlooking the most obvious attempts at fraud."

Several things are troublesome to me.

There is a problem with the management of the IRS, which most taxpayer's complain to their congressmen about.

However, the IRS is overburdened and understaffed for all the duties and responsibilities dumped on it by a Congress without mercy. This is what I see as the cause for IRS management to wrongfully, even fraudulently, cut corners.

Congress demands IRS efficiency and the numbers to back that up. Then they can claim to the taxpayers that they really care and are looking out for the taxpayer's welfare.

What the Inspector General's report does reinforce to me is the fact that the income tax code can never be reformed and must be repealed and replaced.

A consumption tax system would work very efficiently and this sort of fraud — and others — would never take place.

Perhaps most important, the IRS is the agency of the government responsible for administering the tax system, and two horribly complex responsibilities are being added to its duties.

That is, the Foreign Account Tax Compliance Act and Obamacare. As I have said before, two more of the “Creatures from Congress.”

Clearly, some congressmen want to put all the blame on the IRS Commissioner and have his head on a platter, so to speak.

But all this overlooks the real culprit that is both crucifying the taxpayer on the cross of the income tax system, and, combined with limitless spending, is bankrupting this country.

If you are looking for somebody to blame for this latest travesty on taxpayers, then you need only to look as far as Congress.

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Monday, 13 August 2012 10:25 AM
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