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Tax ID numbers combine for multiple IRS refunds

By   /   June 27, 2013  /   No Comments

TIGTABy Kenric Ward | Watchdog.org

WASHINGTON — Taxpayer Identification Numbers continue to open a pipeline for questionable refunds from the Internal Revenue Service, a new government report shows.

A critic of the nation’s immigration system calls the situation “egregious and outrageous.”

The Treasury Inspector General for Tax Administration revealed last month that the IRS continues to log multiple Individual Taxpayer Identification Numbers at single addresses across the country.

From July to December 2012 — months after an initial Treasury audit exposed the practice — investigators found 1,010 IRS-issued ITINs assigned to a single address in Atlanta. More than 100 numbers were issued to single addresses in eight other cities, ranging from Washington, D.C. (423) to two addresses in Indio, Calif. (156 and 109).

Since 1996, the IRS has dispensed more than 15 million ITINs. Some 1.3 million were assigned in 2012 alone.

ITINs are assigned to people who do not have and are not eligible for a Social Security card. Because ITINs can be obtained regardless of immigration status, they are typically used by residents not authorized to work in the United States or non-residents, including illegal immigrants.

A 2012 report by the Treasury Inspector General found that IRS management:

  • “Created an environment that discouraged tax examiners responsible for reviewing ITIN applications from identifying questionable applications.
  • “Eliminated successful processes used to identify questionable ITIN application fraud patterns and schemes.
  • “Established processes and procedures that were inadequate to verify each applicant’s foreign identity and status.”

As Watchdog.org reported this week, ITIN holders — non-residents and unauthorized workers — have collected millions of dollars in tax refunds. Hundreds, even thousands, of those refunds were sent to single addresses.

For the 2011 tax year, the IRS mailed 23,994 refunds worth a combined $46,378,040 to ITIN holders who all used the same Atlanta address.

Additionally, the IRS sent 11,284 refunds worth a combined $2,164,976 to ITINs at a second Atlanta address; 3,608 worth $2,691,448 to a third; and 2,386 worth $1,232,943 to a fourth.

Though 2012 tax year data were not available, the latest Treasury audit reported that with the advent of new rules, rejected ITIN applications increased from 226,011 in the July-December 2011 period to 340,659 during the same period last year.

Nevertheless, auditors said the IRS failed to adopt two “proactive” screening reforms. According to their report, the agency “has not completed corrective actions” to:

  • Analyze information included in a “real-time system to identify indicators of questionable ITIN applications for the purpose of proactively identifying questionable applications during processing.”
  • Establish organizational lines of responsibility, processes and procedures “for detecting, referring, and working ITIN application fraud schemes.”

“The information contained in the Real-Time System can be used to identify ITINs being assigned to individuals at the same address, which could be indicative of fraudulent applications,” the audit stated.

“The IRS has not developed a cross-functional process to work ITIN application fraud schemes.”

The Inspector General’s office declined to elaborate on its report. The IRS would not disclose or comment on the addresses that received multiple tax refunds.

The Immigration Policy Center, a pro-immigration group, says, “ITINs let more people pay into the system, which builds the tax base.”

“More than $300 million was collected in taxes in 2001 alone from ITIN filers — a large portion of whom are undocumented,” IPC states on its website.

NUMBERS GAME: Eric Ruark says it's "clear that a good proportion of these returns are fraudulent."

NUMBERS GAME: Eric Ruark says it’s “clear that a good proportion of these returns are fraudulent.”

Eric Ruark, director of research at the Federation for American Immigration Reform, called the multiple tax refunds in Atlanta “egregious and outrageous.”

“The IRS claims that it is not responsible for enforcing immigration laws, but it is responsible for ensuring there is not rampant tax fraud,” he told Watchdog.

“One of the things it could do is to better scrutinize tax returns filed under an ITIN number, since it is clear that a good proportion of these returns are fraudulent,” he said.

David North, a policy analyst at the Center for Immigration Studies, another enforcement-oriented think tank, said the overlay of immigration and tax issues reveals gaps in the federal bureaucracy.

“From my long experience with the government, I have a strong sense that no agency likes to do another agency’s work, and so the IRS is loathe to tangle with illegal immigration in any form,” North told Watchdog.

“Further, there is the strong, dead hand of tradition: If we did it this way in the past, it is a lot easier to keep doing it — wrong or right — than change it. You might call both factors inertia.”

Kenric Ward is a national reporter for Watchdog.org and chief of the Virginia Bureau. Contact him at kenric@watchdogvirginia.org or at (571) 319-9824. @Kenricward

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Kenric Ward is a veteran journalist who has worked on three Pulitzer Prize-winning newspapers. A California native, he received a BA from UCLA (Political Science/Phi Beta Kappa) and holds an MBA. He reported and edited at the San Jose Mercury News and the Las Vegas Sun before joining Watchdog.org in 2012 as Virginia Bureau Chief.

Watchdog.org Virginia Bureau, is in no way affiliated with "The Virginia Watchdog". Any similarities between Watchdog.org Virginia Bureau and "The Virginia Watchdog" is completely coincidental and unintentional. Any inquiries into "The Virginia Watchdog" may be done through their site.