Irs Requiring Taxpayers To Provide Dependent Ids

In an effort to crack down on tax fraud, the Internal Revenue Service has pumped out 5.8 million form letters demanding taxpayers prove the identity of their dependents - a process that is delaying refunds for weeks and triggering protests the IRS is issuing “scary” letters that target the poor.

Critics say the IRS initiative is unfair because it focuses on low-income taxpayers seeking the Earned-Income Credit, which was designed to be an economic incentive to get off welfare and get a job. Tax cheats, many of them exploiting the electronic-filing system’s weaknesses, have invented dependents by using false Social Security numbers to boost their credit, which is worth as much as $2,528.

The IRS warned months ago it might take eight to 10 weeks to approve suspicious or incomplete returns - significantly longer than the turnaround for an unquestioned refund request. But now millions of last-minute tax-filers are receiving potentially confusing IRS letters demanding they verify the identity of their dependents.

IRS spokesman Chips Maurer said the issue is simple: “There’s just too much fraud.”

Under pressure from Congress to clamp down on cheats, the IRS beefed up its staff scrutinizing suspicious forms and tightened its screening process of EIC claims this year. It is cross-checking all Social Security numbers - rather than just spot-checking, as it had in previous years - and kicking back anything that doesn’t match.

In many cases, the screening is catching legitimate problems, such as phantom dependents or divorced parents claiming the same child.

In other cases, however, it is creating time-consuming headaches for taxpayers who simply transposed digits in a number, who have stepchildren with a different last name, or who married and began using a name that differs from the one on their Social Security card.

Taxpayers caught in the IRS screen must fill out Form 9598. One part essentially reproduces the basic test to determine whether someone qualifies as a dependent. The other seeks basic information such as Social Security numbers and information about dependents, as well as detailed paperwork such as a copy of a divorce decree or legal separation agreement.