IRS struggles to handle fraudulent tax returns under smaller budget

Budget

IRS struggles to handle fraudulent tax returns under smaller budget

The IRS is in a bind to be both fast and accurate with this season's tax returns, and awards billions in fraudulent claims as a result. That's a problem that will...

Federal News Network Staff

February 24, 2015 12:09 pm

2 min read

By Jory Heckman
Federal News Radio

As the Internal Revenue Service works through the tax filing season, the agency has a narrow line to walk: Send refund checks to law-abiding taxpayers in a timely fashion while also scrutinizing tax returns for identity fraud — a process which can take up to 120 days to resolve, according to the agency.

The IRS, which has 16,000 to 17,000 fewer employees than it did five years ago, is in a bind to meet both of those goals, and as a result, awards billions in fraudulent claims. That’s a problem that will only get worse unless Congress raises IRS’ budget to allow for new hires, according to the National Treasury Employees Union.

“As criminals become more sophisticated and tech-savvy, Congress must help the IRS stay ahead of the lawbreakers and identity thieves,” NTEU President Colleen Kelley said in a press release. “Now is not the time to cut funding for an agency that collects 93 percent of the federal government’s revenue. Congress must increase the [fiscal year] 2016 budget.”

The Government Accountability Office reported that in 2013 that the IRS prevented $24 billion from being sent to ID fraudsters, but still paid out $6 billion in improper payments to fraudulently-filed claims.

The IRS knows how big the problem is. It diverted 3,000 employees in 2014 to the division that handles identity theft cases to deal with a “huge spike” in fraud claims, IRS Taxpayer Advocate Nina Olson said. But the agency workforce is already thinnly spread and needs more resources to tackle the issue, according to Kelley.

“Combating ID fraud is quickly becoming the next big challenge for the IRS,” the NTEU leader said. “The IRS is doing the best it can but it urgently needs more resources to catch more of these ID thieves and resolve the cases faster so taxpayers are not forced to wait anxiously for months on end.”

GAO’s latest High Risk List concluded that an “uncertain budgetary environment” is one of the main reasons IRS enforcement hasn’t tackled fraud more aggressively.

The IRS currently has a budget of $10.9 billion, which has shrunk by $1.2 billion since 2010. Under President Obama’s budget proposal for fiscal 2016, the agency would have a $12.9 billion budget.

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