The Internal Revenue Service chief is urging the Congress to make a simple change in federal law, all to make it easier for the tax agency to stop identity theft, which in part leads to the IRS wrongly sending out billions in taxpayer refunds each year.
“The IRS is estimated to have paid out $5.8 billion in fraudulent refunds last year,” said Rep. Mike Quigley (R-IL). “That’s about a 60 percent increase over 2011.”
At a hearing, IRS Commissioner John Koskinen acknowledged that number, but said the tax agency was also able to stop $20 billion in other tax return fraud.
But Koskinen told lawmakers one little change might give the IRS a leg up on criminals looking to defraud Uncle Sam – the timely delivery of a W-2 income form from employers.
“Before I got to this agency, I assumed the IRS got the W-2’s at the same time we all get them as workers and taxpayers,” Koskinen told a House hearing.
But the IRS chief says while taxpayers get those forms in late January, the W-2 income reports don’t arrive at the IRS until March.
“We’re actually able to match (reported income), but it’s ‘pay and chase’ in that regard,” Koskinen testified.
And because of that lag time, it gives extra room to people to file fraudulent tax returns in the hope of getting an illegal refund from the IRS.
“It strikes me as rather odd,” said Rep. Tom Graves (R-GA), “that the Internal Revenue Service would, without verification, send out a refund.”
“We need legislative help,” the IRS chief said. “We need W-2’s earlier, so we can match them up at the front end.”
For the current tax filing season, the W-2’s have been in taxpayer hands for weeks – but they still aren’t at the IRS to allow the feds to double check what taxpayers are reporting.
“We haven’t gotten the W-2’s yet, and we’ve already sent out 60 million refunds,” Koskinen said.
“We need to be able to get those W-2’s in January, and not in March,” the IRS chief added.