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Editorials

Dispiriting findings in federal tax-fraud probe

Staff
Published:   |   Updated: March 18, 2013 at 11:35 PM

The Internal Revenue Service assures us members of the taxpaying public that it is trying harder to stop sending our money to identity thieves, but a recent audit leaves us far from reassured.

The recent review found that the IRS missed more than $5.2 billion in fraudulent refunds last tax year. More specifically, they were "potentially" fraudulent returns, because relatively few of the larcenists have been caught and prosecuted. Whatever else it may have missed, the IRS says it did stop $6.5 billion in fraud.

If both estimates are correct, then the crooks are batting .444 in getting big refunds. That's disheartening. The odds of scoring an IRS payout are much too high.

The IRS didn't volunteer these statistics. The audit by the Treasury Inspector General for Tax Administration was requested by U.S. Sen. Bill Nelson.

He is responding to complaints from Tampa Police and other officials here that phony tax returns are bringing windfall returns to local crooks. Based on the number of obviously fishy filings, Tampa appears to lead the nation in the prevalence of tax-refund fraud.

Fortunately, Tampa police and postal authorities here have been unusually aggressive in sounding the alarm about the network of sophisticated criminals who have learned that the IRS can be tricked into sending money now and asking questions only later.

Nelson has proposed a bill that would restrict access to Social Security numbers and allow for better cooperation between local police and federal agents. It's a start but won't plug all the holes in a system with such a big temptation to cheat. As long as a major part of the federal government's aid to individuals is delivered through the income-tax system, the swindle will continue. That's demoralizing.

Even if an enforcement crackdown succeeds in Tampa, the tax-cheat gangs can easily relocate.

And the incentive to cheat could increase. Many conservatives argue that the best way to provide broader health coverage is to mail qualified households cash incentives through the IRS rather than to penalize those who lack coverage, as is the controversial approach under new health care law. Such an expansion of the possibilities for fraud doesn't make sense to us as long as the current system is hemorrhaging so much money,

The scale of the loss is to all honest taxpayers extremely frustrating. One home in Lansing, Mich., sent in 2,137 returns and got back $3.3 million in refunds.

From another single home in Chicago came 765 returns for the 2011 tax year resulting in $903,084 in refunds. A home in Belle Glade sent in 741 returns and got $1 million. A post office box in Orlando was linked to 703 returns and $1 million in refunds. So when we hear that one house in Tampa sent in 518 returns and got back $1.8 million, it doesn't sound all that unusual.

We would like to think that if the IRS got 2,137 requests for different refunds from a single house, it would at least take a look at the address on Google Earth and see if looks like a place where a few thousand people could actually live.

Tampa Police spokeswoman Andrea Davis told Tampa Tribune reporter Elaine Silverstrini, "It's something we have been talking about for going on three years and felt like no one was listening." To taxpayers, that's discouraging.

The IRS, never known as a chatty agency, has had little to say on the record about this issue. Clearly, it needs more manpower to discover and prosecute fraud, and a lesser role as the nation's welfare banker.

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