Inspector General: ‘Extraordinarily Complicated’ Tax Instructions Lead To Billions In Fraud

Patrick Howley Political Reporter
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The Treasury Department’s inspector general blasted the Internal Revenue Service (IRS) for “extraordinarily complicated” tax instructions and for allowing billions of dollars of fraud and identity theft at a House Appropriations Committee hearing Wednesday.

Inspector general J. Russell George told Appropriations’ financial services subcommittee that the IRS conservative targeting scandal could possibly happen again because “there are bad apples everywhere.”

George said that he finds the IRS’ strategy to prevent abuse “appalling.”

“I find it appalling, congressman, when the message from the IRS is, ‘File early so that the criminals can’t take advantage of you.’ It’s extremely troubling,” George said. “And it may be common sense and again with resource limitations and what have you, but I am actually very shocked and disappointed by that message.”

Georgia Rep. Tom Graves pointed out that $5 billion in reported identity theft is nearly half of the IRS budget for one year. U.S. Taxpayer Advocate Nina Olson said that the IRS is working with some major employers to build a database of W2 information before filing season, then checking to see if the information on people’s returns matches its database.

George also assailed the process for applying for the earned income tax credit. New York Democrat Rep. Jose Serrano asked whether tax filers are the best safeguard against earned income tax credit filing mistakes and fraud.

“The instructions for following the earned income tax credit are extraordinarily complicated,” George said. “We have a voluntary compliance system, so if someone wants to cheat on their taxes, unless you required third-party reporting on everything anyone earns, people will be able to do so. The key of course would be for the IRS to make examples of people who are caught having cheated on any aspect of their tax return. That obviously practically cannot work because of the millions of people involved and the billions of dollars involved.”

George also weighed in on the IRS targeting scandal.

“We’re human beings, sir,” George said. “So you can have every rule in the world and if someone wants to disregard the rule they can.”

“There are bad apples everywhere,” George said, noting the IRS’ staff size. “I’m not going to sit here before Congress and say that nothing could ever re-occur, but I think in this environment you’re dealing with some smart people now at the head of that organization.”

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