GAO Report: Nearly 20 Percent Of Tax Returns Sent To Fraudsters

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The Government Accountability Office still considers the IRS as doing “High-Risk” activities — wasting billions of taxpayer dollars — in its most recent report on the subject. Per IRS data, many fraudsters still receive someone else’s tax refund.

“It is a huge problem,” James White, director of the Tax Issues at the GAO, told The Daily Caller. “Although the IRS was able to detect some $24 billion in fraudulent returns, they still estimate that nearly $5.8 billion pass through their detection systems.”

To alleviate the problem, White had a few suggestions for the IRS. “First the IRS needs to accelerate the distribution of W2 forms. As of now, the employer has until the end of January to send the forms to their employees, the forms arrive at the IRS by the end of March and their IT systems start the “matching” — between the employer’s and the employee’s W2 — in the summer. If a fraud is elaborate enough, then many fraudulent tax returns can be cashed in before summer.”

“The IRS would need to weigh the cost-effectiveness of upgrading their systems so there could be a real-time matching of forms,” White said. “They need to know if it can prevent enough fraud so the upgrade is worth it.”

To help improve the speed, he suggests that W2s be filled electronically. “Most forms are still filled with a pen and paper, meaning that IRS agents must put them electronically first before they can be analyzed.”

Finally, White believes that financial institutions can help with fighting fraud. “Banks, where most tax returns end up, also have fraud-detection systems; they can sometime catch up fraud that slipped through IRS systems. Although taxpayer privacy keeps the IRS from directly pointing out at specific fraudsters, the government agency could still send aggregated feedback to banks — stating the percentage of fraud suspicions ended up being accurate. This would show banks how accurate their own systems are.”

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