The final report, There Are Billions of Dollars in Undetected Tax Refund Fraud Resulting from Identity Theft issued on July 19, 2012 by the Treasury Inspector General for Tax Administration, bases its analysis of 2010 tax returns, where billions of dollars were fraudulently withheld. According to Bloomberg News article (8/2/2012), the IRS, in addition, may lose 21 billion dollars in the next 5 years citing examples, such as, one address in Lansing, Michigan, where more than 3.3 million dollars in refunds was listed on 137 separate returns; and at least in ten cases, where the IRS sent more than 300 direct deposits of refunds totaling more than $470,000 to the same bank account. “At a time when every dollar counts, these results are extremely troubling. Undetected tax refund fraud results in significant, unintended federal outlays and has the potential to erode taxpayer confidence in our nation’s system of tax administration,” said J. Russell George, the treasury inspector general for tax administration. As part of this report, the Treasury Inspector General for Tax Administration recommended immediate changes by directing the IRS to minimize identity theft in the future. This year, the IRS released its annual Dirty Dozen Tax Scams for 2012 with full explanations for 1) identity theft, 2) phishing, 3) return preparer fraud, 4) hiding income offshore, 5) free money involving Social Security, 6) false/inflated income and expenses, 7) false Form 1099 refund claims, 8) frivolous arguments, 9) falsely claiming zero wages, 10) abuse of charitable organizations and deductions, 11) disguised corporate ownership, and 12) misuse of trusts. One possible conclusion from looking at this list is that tax fraud spans all income levels of U.S. citizenry. “Online tax cheats are swindling billions from law-abiding Americans,” said Senator Bill Nelson of Florida, “Iit’s an ongoing problem, and we’ve got to find a fix.” This report shows that identity theft fraud has been most concentrated in Florida, with more than 468 million dollars in potential fraud in Tampa and 280 million dollars in Miami.
Recently, the Government Accountability Office found a legal technicality preventing the IRS from stopping payments to doctors, hospitals, and other providers in order to collect tax debts. After looking at only three states, congressional investigators found thousands of Medicaid health care service providers are continuing to receive payments from the federal government, even though they owed hundreds of millions of dollars in federal taxes. The problem arises because the Medicaid funds are technically not considered federal funds since they become state funds that are used for state-run health care programs according to The Washington Post (8/2/2012). U.S. Senator Tom Coburn of Oklahoma said, “GAO found that thousands of health care providers billing the Medicaid program were also tax cheats. People who cheat on their taxes show a clear disregard for the law so they might be more likely to defraud Medicaid, or even harm patients.“ And, U.S. Senator Carl Levin of Michigan agrees, “It is outrageous that heath care providers who cheat on their taxes are getting paid with taxpayer dollars through the Medicaid program. The federal government ought to prohibit health care providers with unpaid taxes from enrolling in Medicaid, allow continuous levies on health care providers’ Medicaid payments to recover unpaid taxes, and authorize tax levies on Medicaid payments to Managed Care Organizations whose doctors or other principals are tax delinquent.”
The U. S. House of Representatives voted 263-114 on HR 828 bill known as the Federal Employee Tax Accountability Act of 2011, which amends Title 5 of the U.S. Code, creating a statute to fire U.S. government workers who are seriously delinquent on their taxes and exempt those working with the IRS to resolve their tax problems. In a press release from U. S. Representative Jason Chaffetz of Utah, sponsor of the bill, it found that there were 102,794 federal employees who were delinquent with their federal taxes in 2004 and only a slight drop to 98,291 in 2010, including some 700 congressional employees. The cost to taxpayers rose from just under $600 million in 2004 to more than $1 billion by 2010.This bill would identify those who are seriously delinquent ineligible for federal employment, whether they are currently working for the government or applying for a job. New job applicants would certify that they have no tax delinquency problem and agencies would conduct periodic review of public records for tax liens on employees. “Employees who consciously ignore the channels and processes in place to fulfill their tax obligations must be held accountable,” said Chaffetz. “In short, if you refuse to pay your federal taxes you should be fired.” HR 828 moves to the U.S. Senate for review and passage before it becomes a law.
Susanne L Woodford, Freelance Writer