IRS issued $70 million in bogus refunds to prisoners

We keep hearing about tax reform and its absolute necessity — and no, I’m not talking about higher taxes. We must move away from the progressive tax code system, which currently plagues our economic recovery. As a matter of fact, while a Member of Congress, I referred to our tax system as a WMD, a weapon of mass destruction on our economy — especially our small business owners who operate from their personal income tax rate as a sub-chapter S corps or LLCs. And don’t forget our corporate/business tax rate is the highest in the world at 39.6 percent — not exactly an incentive for doing business here.

Of course a key reason for tax reform is to get the Internal Revenue Service under control — especially as it becomes more and more embroiled as a political tool.

However, as reported by Fox News, there is an even greater problem, as “hundreds of thousands of prisoners are filing phony tax refund claims and the IRS is not doing enough to quash the problem, according to a watchdog report. The Treasury Inspector General for Tax Administration (TIGTA) said in its report Tuesday that refund fraud associated with prisoner Social Security numbers is a “significant problem” for the tax agency that is only getting worse over time. According to the report, more than 137,000 phony tax returns were filed in 2012 using a prisoner’s Social Security number to the tune of $1 billion. While many of the fake refunds were flagged and prevented by the agency, the IRS issued $70 million in bogus refunds.”

“Tax refund fraud associated with prisoners remains a significant problem for tax administration,” the report said. The watchdog determined that the IRS was not taking a number of steps to crack down on the fraud. For one, the report said the IRS has not shared the information about the fraudulent claims with state and federal prison authorities. In addition, the watchdog found that the IRS was not providing consistent updates to Congress about the problem, as is required by the Inmate Tax Fraud Prevention Act of 2008. “TIGTA also found that the required annual prisoner fraud reports to Congress are not timely and that the reports do not address all aspects of prisoner fraud,” the report said.”

The obvious question is, who’s supposed to be tracking these potential fraudulent claims? And we are going to have an even bigger issue with President Obama’s unlawful — “prosecutorial discretion” — executive order on illegal immigration after those granted deferred deportation and work permits start filing tax claims? If folks believe we’ll see an increase in the federal coffers, they’re delusional. Many of these new folks are under the poverty level and that means an explosion of the Earned Income Tax Credit (EITC).

If there’s a Republican president come 2017 he or she should just enact tax reform by executive order. Why not? We’ve waited long enough. Of course I jest, but a precedent has been established.

Our entire government system must be streamlined and right at the top of the list is the IRS. If we move towards a simplified flat tax system, we can begin reducing the impact of the IRS and reverse the trend of taxation based on income, and slowly begin to return to a more fair system based on consumption. However, as we reform our tax system, it is imperative that we reassess the structure and priorities of the federal government.

Since the Great Society of Lyndon Johnson, we’ve seen an explosion in the size and scope of government. Along with that also comes regulatory reform — we reported here about the more than 3,000 new regulations the federal government will issue over this Christmas season — while you weren’t watching. What enables the bureaucrat state to exist and grow? The usurpation of the resources of hard working Americans — and don’t give me the “fair share,” “economic fairness,” or “economic patriotism” sound bites.

We are wasting far too many taxpayer dollars and there’s far too much fraud in our current system of taxation — heck, if former Secretary of the Treasury Timothy Geithner and former Ways and Means Chairman Charlie Rangel can’t figure out the 67,000 page U.S. tax code, — then it’s time for reform.

As for the prisoner tax claim fraud, Fox says “TIGTA made six recommendations to the IRS to remedy the problem, of which the agency agreed with four. In response, a representative for the IRS said the agency is working to stop the problem of prisoner tax refund fraud. “The IRS has continued to build on processes to detect and stop potentially fraudulent refund claims made by prisoners,” Debra Holland, the agency’s commissioner of its Wage and Investment Division, said.”

And this is from the agency that couldn’t keep track of Lois Lerner’s emails – by the way, how much is she getting for her taxpayer-funded pension again?

Yep, and if you like your doctor you can keep your doctor, and if you like your health insurance, you can keep your health insurance — period. And just how many Pinocchios has the Obama administration amassed to date?


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