TIGTA Report Reveals Bogus IRS Refunds

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By Teresa Ambord

If it seems like everyone is ganging up on the beleaguered IRS, the truth seems to be more along the lines of long-term problems that are just now coming into focus. Not that the problems went unnoticed before. The alarm bells have been sounding loud and clear for a long time. It seems more likely the right people didn't care or were powerless to stop it. 

Over a year ago, on July 16, 2012, the Treasury Inspector General for Tax Administration (TIGTA) issued a report – Substantial Changes Are Needed to the Individual Taxpayer Identification Number Program to Detect Fraudulent Applications – which revealed that the gatekeepers of our tax revenue, the IRS, gave away tens of millions of taxpayer money in bogus tax refunds to "unauthorized" immigrant workers for tax year 2011. 

Of those refunds, 23,944 were mailed to a single address in Atlanta, Georgia, for a total of $46,378,040. Another Atlanta address received 11,284 separate refunds for more than $2,164,976. 

TIGTA said similar refunds went to bogus addresses around the country, with, among the top ten: 

  • Oxnard, California – 2,507 refunds sent to one address totaling over $10.3 million.
  • Raleigh, North Carolina – 2,408 refunds sent to one address for nearly $7.3 million.
  • Phoenix, Arizona – 2,047 refunds sent to one address worth nearly $5.6 million.
  • Runners up were addresses in Palm Beach Gardens, Florida; San Jose, California; and Arvin, California – totaling refunds of more than $10.7 million.

Yet, TIGTA's 2012 report wasn't enough for the IRS to batten down the hatches and stop the outflow of taxpayer funds. It was largely ignored. Until now. 

This isn't a new scandal/problem/issue 

Watchdogs were in place. Since 1996, the IRS has assigned an Individual Taxpayer Identification Numbers (ITINs) to individuals who are ineligible to acquire Social Security Numbers, and TIGTA has been drawing attention to the problem going back to the Clinton Administration. For example, in 1999, the Treasury Inspector General at the time noted",The IRS issues ITINs to undocumented aliens to improve nonresident alien compliance with tax laws. This IRS practice seems counter-productive to the Immigration and Naturalization Service's mission to identify undocumented aliens and prevent unlawful alien entry." 

How did the bogus refunds come into the light?

CNSNews.com noted TIGTA's 2012 audit report happened as the result of two IRS employees who went to Congress "alleging that IRS management was requiring employees to assign ITINs even when the applications were fraudulent." 

In a statement accompanying the TIGTA report, Treasury Inspector General J. Russell George said the audit "found that IRS management has not established adequate internal controls to detect and prevent the assignment of an ITIN to individuals submitting questionable applications. Even more troubling, TIGTA found an environment which discourages employees from detecting fraudulent applications." Tax examiners were inadequately trained and routinely missed errors on the applications for ITINs. Even so, those tax examiners did not receive poor performance ratings in spite of the costly errors. 

Other voices weigh in

Citizens Against Government Waste is demanding the IRS take steps immediately to stop tax refund fraud. CAGW is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government. 

CAGW President Tom Schatz said",In response to this report, the IRS will almost certainly blame a lack of resources, but the incentives in place for tax examiners and their inadequate training are the result of bureaucratic incompetence, not a lack of funding. Lawmakers should be leading the charge to reform the IRS' lackluster fraud prevention system."

Just a few days ago when the national spotlight fell on TIGTA's report – which, again, has been public for more than a year – the Wall Street Journal wrote: "Stemming the tide of tax refund fraud is a complex challenge, but the IRS has demonstrated that it is unable to implement even the most commonsense safeguards and is sending staggering amounts of money to fraudsters whose schemes appear to be fairly unsophisticated." 

George estimates that at the rapid rate this fraud is increasing, the IRS could issue $26 billion fraudulent refunds in the next five years. He said that since 2008, the number of fraud cases handled by the IRS has jumped 650 percent. That's less shocking when you consider the tax agency itself seems to have left the door to the mint open and resisted TIGTA's warnings. Instead, chances are with the uptick in fraud cases, they're hiring more fraud investigators to investigate fraud cases they helped create by inadequate practices. 

What the IRS said

The IRS maintains it has made progress in the fight against tax refund fraud. But the Wall Street Journal asks an obvious question. Why don't they apply the same security measures that retailers apply, asking verification questions, such as "What street did you grow up on?"

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By Clarence
Jun 26th 2015 01:11

You gotta think the IRS lets this go on because there are illegal aliens involved. Like the Social Security Administration. They get 30 full time workers in six states on one SSNbr, and do they tell ICE? No. That would violate some rule. The rule being, if there are illegal aliens involved, we don't enforce anything. IRS knows a SSN/ITIN mismatch filing should receive extra scrutiny, but instead they go to IRS workers/contractors who are rewarded for high approvals per hour.

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