According to the Treasury Inspector General for Tax Administration (TIGTA), the IRS could issue nearly $2.3 billion in fraudulent refunds to taxpayers who steal or forge tax identification numbers. TIGTA recently released results of an audit of the IRS, which showed that the IRS routinely issued refunds to businesses which had fabricated or stolen EINs. For tax year 2011, TIGTA’s audit discovered 277,624 stolen EINs and 8,064 falsely obtained EINs were used to file a combined 767,071 returns. The result of these tax returns was $2,273,177,371 in potentially fraudulent refunds. TIGTA fears this trend could continue costing the IRS over $11 billion in fraudulent refunds over the next 5 years. The IRS does record and track suspicious EINs; however, in 2012 this lead to the prevention of only $35 million in fraudulent refunds. As you can see, there is a long ways to go to combat the problem. A large hurdle to the IRS’s efforts to discover fraudulent refunds is that it does not want to delay the issuing of legitimate refunds. Nevertheless, it is apparent the IRS is going to explore many options and take additional efforts to try to cut into the staggering amount of fraudulent refunds.
Besides the frustration that someone else is costing you tax dollars while you pay your fair share, this also means a few other things for honest taxpayers. First, you should be vigilant about your tax information. In this age many people are aware of the risks of identify theft, but this is just one more area to be cautious of your personal information. Next, as the IRS continues to search for fraudulent refunds you want to make sure you don’t accidentally wind up on the IRS’s radar. Improper reporting or presentation of your tax information could flag your tax return as a potential problem and at the very least the IRS could come asking questions for you to resolve the issue. Ensure that your tax preparer is reputable and presents your information correctly. Lastly, whenever you receive correspondence from the IRS, or any taxing agency, it should never be ignored. Sometimes taxpayers feel they can ignore an incorrect notice because they figure the IRS will solve the problem itself or that it is not their issue since the information is wrong. However, if someone has stolen your tax ID and the IRS is questioning you about it, you will also be the one they take enforcement action against if the questions are not answered. In these situations it is always better to be proactive and resolve the issue instead of waiting for the IRS to take action against you.
If you have encountered any problems with your tax filings, contact us today at Hone Maxwell LLP to review your case. We can work with the IRS to make sure your correct tax information is the information that is on file under your tax identification number. When problems arise because of a mistake or otherwise, we can work with you to get the proper information filed and your account in good standing. Per our previous post, “Ignoring the IRS Never Works, Well Almost Never” it is not a good idea to wait and hope the situation resolves itself on its own. For more tax updates and the latest news you can follow us on twitter @HMLLPTax or facebook at www.facebook.com/HoneMaxwellLLP