IRS Discouraged Fraud Detection, Treasury Says
The Internal Revenue Service has been looking the other way instead of rooting out fraud when people apply for taxpayer identification numbers, Treasury Department investigators said Wednesday, exposing a shortfall with both financial and national security implications.
A member of Congress who sits on the House’s tax-writing committee responded to the report by calling on IRS Commissioner Douglas Shulman to resign, claiming the IRS is helping illegal immigrants defraud the government.
Non-citizens without Social Security numbers have to get ID numbers from the IRS to claim tax refunds. Their applications for ID numbers are processed at an IRS center in Austin, Texas.
J. Russell George, the Treasury Department’s inspector general for tax administration, said investigators looking into the application process found “an environment which discourages employees from detecting fraudulent applications.”
Instead, IRS employees were encouraged to process as many ID applications as possible, George said in his report. In addition, investigators learned that the IRS had quit using successful fraud-detection measures in processing the applications.
“There is a potential that erroneous tax refunds are going to non-qualifying individuals, allowing them to defraud the federal government of billions of dollars,” investigators wrote in the report.