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January 6 2016

Oops: IRS Sends Out An Estimated $135 Mil in Fraudulent Tax Refunds over Five Years

Patrice J. Lee

The 2016 tax season is just around the corner and each year the Internal Revenue Service (IRS) warns of potential problems and lag time in processing returns and providing customer service to taxpayers.

Despite blaming its problems in processing on budget shortfalls, the IRS was able to send out $46 million in fraudulent tax refunds. Problems with lax oversight and internal processes led the agency to be a target of fraud by scammers.

The IRS claims that its Integrity and Verification Operations computer program prevented more than $15 billion in bad refunds for over 2 million fraudulent returns. However, a new government watchdog report finds that the system has problems. In 2013, the IRS released more than $46 million in tax refunds for potentially fraudulent claims because of poor monitoring and a computer error with its fraud program.

 According to the Treasury’s Inspector General for Tax Administration, $27 million in refunds for 13,043 taxpayers had been marked as questionable and in need of further review. However, a programming error overrode the two-week processing delay on these returns and shipped the checks right out. Another $19 million in refunds for 3,910 returns were marked as potentially fraudulent and had been left unverified. The IRS’s software accidentally set in motion those refunds as well.

It wasn’t the computers’ fault. The IRS didn’t ensure that tax examiners completed verifications in a timely manner. They weren’t paying attention to the processing of these returns because this glitch should have been caught sooner.

Over five years, the error could have led the IRS to dole out $135 million in fraudulent returns.

The Washington Post reports on how the IRS needs to get its act together:

The watchdog recommended that the IRS fix the computer glitch and start periodic testing to make sure suspicious returns are verified in a timely way.

The agency agreed to all the recommendations. But officials could not commit to a date to put the programming fixes in place, citing budget constraints, limited resources, and competing priorities.

“The implementation of such programming changes are subject to budgetary constraints, limited resources, and competing priorities,” IRS officials told the inspector general, according to the audit. “Consequently, and due solely to those constraints, the IRS cannot provide an implementation date.”

It seems that at the IRS, as with other federal agencies, no one wants to acknowledge that poor job performance is responsible for costly mistakes and fraudulent activity.

Furthermore, excuses abound for why changes aren’t implemented quickly. Throwing money at a problem doesn’t make it better, it just makes it bigger. Instead of passing the buck and devoting resources to harassing taxpayers and discriminating against conservative groups, those resources should be reallocated to fixing system errors and diligent monitoring.

 

 

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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