A government watchdog is barking at the IRS for missing tax frauds relating to identity theft.
Alert: The IRS detected 938,664 tax returns totaling $6.5 billion in fraud for 2011. But a new report from the Treasury Inspector General for Tax Administration (TIGTA) suggests that it missed another 1.5 million tax returns with fraudulent tax refunds totaling more than $5.2 billion. (TIGTA 2012-36, 8/2/12)
TIGTA estimates the IRS could issue $21 billion in fraudulent tax refunds over the next five years. Accordingly, it has recommended that the IRS make the following changes in its procedures.
1. Develop processes to use the National Directory of New Hires (NDNH), a database containing information on all newly hired employees, to verify wage and other information. (Currently, the IRS is not permitted to access this information for this purpose.) The IRS should also use prior-year third-party income and withholding informatio...(register to read more)