Good news for tax thieves! Their income is estimated to go up 262 percent this year, from a mere $5.8 billion to $21 billion in stolen tax returns. Federal auditors just ranked the Internal Revenue Service’s ability to combat identity theft and fraudulent tax returns as one of the top weaknesses in the government.
The Government Accountability Office on Wednesday released this year’s edition of the agency’s “High Risk List” – which details the most vulnerable areas in the federal government for waste, fraud and abuse. A new addition this year is the IRS’s effort to weed out identity theft and tax fraud at a time when the problem is becoming more prevalent.
In the first half of 2014, The Treasury Inspector General for Tax Administration (TIGTA) reported that 1.6 million taxpayers were affected by identity theft – compared to just 271,000 in 2010. The increase is likely attributed to the uptick in electronic filing. Although this option is convenient for taxpayers, it’s also easier for fraudsters to file fraudulent returns at a faster clip.
The IRS paid out more than $5.8 billion in fraudulent refunds related to identity theft during the 2013 filing season. The agency investigated at least 1500 cases of identity theft during that same time period. Since then, the IRS has been ramping up efforts to combat identity theft, but it still remains a serious problem.
In August, the GAO called it an “evolving threat, one that imposes a serious financial and emotional toll on honest taxpayers and threatens the integrity of the tax administration system.”
The IRS is certainly no stranger to the GAO’s High Risk List – its tax enforcement efforts have been called a weakness every year since 1990. The GAO credits that to the widening tax gap (the difference between taxes owed and taxes paid), which was some $385 billion the last time data was available, according to the report.
The heightened identity theft threat comes as the IRS is reeling from massive budget cuts. IRS Commissioner John Koskinen has routinely warned that the $346 million in cuts will hamper the agency’s ability to do its job this year, including enforcing 40 new provisions under Obamacare as well as combating identity theft and handling its customer service responsibilities.
Still, the IRS says it’s committed to preventing fraud. One way of doing this is issuing identity protection “pins” to victims that they can use to file future tax returns. The GAO says more needs to be done to catch tax thieves in the first place.
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