Tax
News: Commissioner Everson Calls for Improvements
to Refund Fraud Program
WASHINGTON — January 24, 2006, Today
in Washington, IRS Commissioner Mark W. Everson announced
his plans regarding the review of the Questionable Refund
Program. This review would also include notification procedures
pertaining to frozen refunds. The program was criticized for
freezing thousands of refunds without notifying taxpayers.
As per the IRS, each year there are more than 130 million
individual income tax returns filed and over 100 million refunds
issued, totaling over $200 billion. Less than 1 percent of
refund returns are retained by the QRP for further scrutiny.
Of the refund claims held beyond the normal refund cycle,
about 200,000 or 0.2 are held longer than one week, and many
refunds are held for a period of months or even years.
The IRS has often not sent notices to those taxpayers whose
refunds are held because some of these returns are subject
to additional criminal investigation. Therefore, the
taxpayers may be unaware that their refunds have been frozen.
Everson stated, "We will announce plans in the very near
future to institute notification procedures as well as significant
processing improvements to minimize the number of taxpayers
whose refunds are frozen unnecessarily".
The IRS has stated that it is bringing in these changes due
to the legitimate issues raised by the members of Congress
and the National Taxpayer Advocate, regarding the length of
delay and lack of notification for refund claims. Congress
has held a number of hearings on the subject, urging the IRS
to devote additional resources and improve its detection and
prevention of fraudulent refunds, mainly those involving prisoners.
According to Everson “Claiming fraudulent refunds ultimately
undermines the integrity of the tax system, but I believe
that appropriate notification should be given when refunds
have been frozen.” He went ahead to say, “Honest
taxpayers expecting a refund deserve to be treated fairly.”
In the recent years, the IRS was faced with a serious problem
of refund fraud. The IRS estimates that fraudulent refund claims
now exceed a half-billion dollars a year. To deal with this
problem IRS set up the Questionable Refund Program (QRP).
The Questionable Refund Program uses computer programs and
other methods to screen tax returns claiming refunds for indications
of fraud. It temporarily freezes returns that might be fraudulent.
False income and withholding are the typical reason for fraudulent
refund claims. A major share comprises of false Earned Income
Tax Credit claims which are almost $4,400 per return.
