internal revenue service Archives

IRS Dithers while Prisoners File Phony Tax Returns, Collect Millions in Refunds

Washington Examiner: “The number of prisoners who file false tax returns with the Internal Revenue Service has more than doubled in the last five years, according to a new Treasury Department report, and the amount of money the IRS has mistakenly refunded to those prisoners has nearly tripled. Meanwhile, the report, from the Department’s Inspector General for Tax Administration, accuses the IRS of failing to enforce a law passed by Congress in 2008 to crack down on false returns coming from the nation’s prisons.”

Playoff PAC Files 27-Page Legal Complaint With Irs Against BCS Football Bowls

The September 23, 2010, Playoff PAC press release:

“Playoff PAC, the principal opposition group to college football’s Bowl Championship Series (“BCS”), today filed a 27-page legal complaint (and executive summary) with the Internal Revenue Service against bowl organizations affiliated with the BCS. The complaint and executive summary list significant tax irregularities discovered through a methodical review of over 2,300 pages of tax records and public documents.

The complaint was submitted to the IRS on Playoff PAC’s behalf by Marcus S. Owens, former head of the IRS’s Exempt Organizations Division, and Joseph M. Birkenstock, former Chief Counsel of the Democratic National Committee. Both attorneys are Members of Washington, D.C. law firm Caplin & Drysdale.

Playoff PAC co-founder Chad Pehrson said: ‘BCS Bowls all claim to be ‘501(c)(3)’ public charities—the same tax designation as the American Red Cross—to make their revenues tax-exempt and obtain other taxpayer-funded benefits. Playoff PAC’s review uncovered a disturbing pattern of BCS Bowl organizations using their charitable funds to enrich Bowl executives, pay registered lobbyists without disclosure, fund political campaigns, and heap frivolous benefits on Bowl insiders. The BCS Bowls’ activities raise important concerns under federal tax laws and we anticipate that the IRS will give these issues due attention’.”

1.2 Million Tax Returns Filed for 2007 Reported Wages Earned on Another Taxpayer’s Social Security Number

Good news for people who steal other people’s social security numbers and report wages using the incorrect SSAN (identity thieves) – the IRS won’t do anything about it. The Treasury Inspector General for Tax Administration issued the following press release:

An estimated 1.2 million tax returns filed in 2007 reported wages earned by taxpayers who used another taxpayer’s Social Security Number, a sign of possible identity theft, according to a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA). The Internal Revenue Service cannot currently identify identity theft cases when taxpayers file tax returns using an Individual Taxpayer Identification Number (ITIN) and use another person’s name and Social Security Number to work, the report found.

TIGTA conducted this review when it learned that individuals using another person’s Social Security Number to work had their wages attached by the IRS to satisfy a tax debt associated with the tax accounts of the legitimate holders of the Social Security Number. ITINs are intended to provide tax identification numbers to resident and nonresident alien individuals who may have U.S. tax reporting or filing obligations but do not qualify for Social Security Numbers, which generally are only issued to U.S. citizens and individuals legally admitted to the U.S. The issuance of an ITIN, however, does not change an individual’s immigration status, nor does it entitle the individual to work in the U.S. or receive Social Security benefits.

TIGTA assessed whether the IRS has procedures to effectively handle collection issues related to ITINs. The IRS lacks internal guidelines for its employees to follow to assist either the taxpayer whose wages are being attached or the legitimate holder of the Social Security Number (who may unknowingly be the victim of identity theft).

“This report reveals a very troubling situation. The IRS must take steps to ensure that innocent taxpayers are notified when there is evidence that their identity has been compromised,” said J. Russell George, the Treasury Inspector for Tax Administration. “When the IRS is in a position to notify victims of the theft of their identity, it should do so without fail.”

TIGTA recommended that the IRS alert taxpayers that their identity may have been compromised, match ITIN returns with their related reporting returns, such as Wage and Tax Statements (Form W-2), and, update guidelines to handle collection issues associated with ITINs. The IRS generally agreed with TIGTA’s recommendations.

To view the report, including the scope, methodology, and full IRS response, go to: http://www.treas.gov/tigta/auditreports/2010reports/201040040fr.pdf..

Beware of IRS’ 2010 “Dirty Dozen” Tax Scams

IR-2010-32, March 16, 2010

The Internal Revenue Service today issued its 2010 “dirty dozen” list of tax scams, including schemes involving return preparer fraud, hiding income offshore and phishing. “Taxpayers should be wary of anyone peddling scams that seem too good to be true,” IRS Commissioner Doug Shulman said. “The IRS fights fraud by pursuing taxpayers who hide income abroad and by ensuring taxpayers get competent, ethical service from qualified professionals at home in the U.S.”

Tax schemes are illegal and can lead to imprisonment and fines for both scam artists and taxpayers. Taxpayers pulled into these schemes must repay unpaid taxes plus interest and penalties. The IRS pursues and shuts down promoters of these and numerous other scams. The IRS urges taxpayers to avoid these common schemes:

Return Preparer Fraud
Hiding Income Offshore
Phishing
Filing False or Misleading Forms
Nontaxable Social Security Benefits with Exaggerated Withholding Credit
Abuse of Charitable Organizations and Deductions
Frivolous Arguments
Abusive Retirement Plans
Disguised Corporate Ownership
Zero Wages
Misuse of Trusts
Fuel Tax Credit Scams

IRS Failed to Answer 22.4 Million Calls During 2009 Tax Season

As the federal government continues to grow, it provides less service at a higher cost. During the 2009 income tax filing season 75.7 million people tried to call the IRS toll-free telephone lines. Although the IRS answered 35.8 million (47.3%) calls, 22.4 million calls were not answered because taxpayers hung up, were disconnected by the IRS or received a busy signal.

Note the alarming negative trends in the chart below that summarizes IRS phone service over the last four years – declining service and longer wait times.

IRS Phone Statistics