Fraud Crackdown Delays Irs Refunds

The Internal Revenue Service already has delayed 1.5 million refunds this year and millions more will be snagged by the agency’s anti-fraud crackdown before the April 17 filing deadline, congressional investigators said Monday.

The delays are hitting returns with Social Security number discrepancies and those that claim the earnedincome tax credit for the working poor, the General Accounting Office said.

IRS Commissioner Margaret Milner Richardson apologized for the delays, ranging up to eight weeks. But she said her agency must aggressively attack fraud estimated at up to $5 billion a year, particularly on returns filed electronically through taxpreparation services.

“I regret there are people who are legitimately entitled to refunds … caught in the initial screens, but we’ve been very concerned about the integrity of the system,” she told the House Ways and Means oversight subcommittee.

Separately, GAO also said telephone calls continue to swamp IRS taxpayer assistance lines, with seven in eight going unanswered during a spot check earlier this month.

And it repeated criticism of the IRS’ effort to replace its antiquated returns-processing procedures with a modern integrated computer system, saying improvements have been only marginal despite expenditures of $2 billion over eight years.

After years of complaints that it was not doing enough to stop fraudulent refunds, the IRS this year began using a new computer screening technique to flag suspicious returns claiming the earned-income credit.

It also began checking the Social Security numbers of spouses and dependents, not just the main filers, in an effort to catch phony claims for exemptions.

As a result, it estimates that as many as 7 million of the 86 million expected refunds this year will be delayed.

“It’s like an ATM (automatic teller machine),” Richardson said. “You can’t get your money out unless you use the correct PIN (personal identification number).”