Identity Theft and the IRS

Practical and Practice issues for Professionals who practice in the area of taxation. Moral, social and economic issues relating to taxes, including international issues, the U.S. Internal Revenue Code, state tax issues, etc. Not for "tax protestor" issues, which should be posted in the "tax protestor" forum above. The advice or opinion given herein should not be relied on for any purpose whatsoever. Also examines cookie-cutter deals that have no economic substance but exist only to generate losses, as marketed by everybody from solo practitioner tax lawyers to the major accounting firms.
User avatar
Pottapaug1938
Supreme Prophet (Junior Division)
Posts: 6107
Joined: Thu Apr 23, 2009 8:26 pm
Location: In the woods, with a Hudson Bay axe in my hands.

Identity Theft and the IRS

Post by Pottapaug1938 »

Hmmmmmmm. It seems to me that the IRS should hire a computer geek or two who knows how to write a program to spot problems like the ones in this article:

http://www.boston.com/business/personal ... story.html
"We've been attacked by the intelligent, educated segment of the culture." -- Pastor Ray Mummert, Dover, PA, during an attempt to introduce creationism -- er, "intelligent design", into the Dover Public Schools
Lambkin
Warder of the Quatloosian Gibbet
Posts: 1206
Joined: Mon Oct 25, 2004 8:43 pm

Re: Identity Theft and the IRS

Post by Lambkin »

That suggestion would be translated as hiring an outsourcing company with 1000 project managers, 500 lawyers, and 2 programmers, which would bill $1 billion dollars and never deliver a working line of code.
Judge Roy Bean
Judge for the District of Quatloosia
Judge for the District of Quatloosia
Posts: 3704
Joined: Tue May 17, 2005 6:04 pm
Location: West of the Pecos

Re: Identity Theft and the IRS

Post by Judge Roy Bean »

And this is the operation that's going to be part of saving us money on health care. :shock: :roll:
The Honorable Judge Roy Bean
The world is a car and you're a crash-test dummy.
The Devil Makes Three
Famspear
Knight Templar of the Sacred Tax
Posts: 7668
Joined: Sat May 19, 2007 12:59 pm
Location: Texas

Re: Identity Theft and the IRS

Post by Famspear »

I think the rule is that in government, you have to spend tens of millions of taxpayers' dollars on a system that won't work -- BEFORE you can get what you want.

From ABC News:
Over ten years after the Sept. 11, 2001 terror attacks and the FBI's computers are finally working.

After years of frustration and hundreds of millions of dollars lost on a system that didn't work, the FBI has finally deployed a new $451 million computer system called Sentinel.

[ . . .]

Sentinel follows a previous attempt by the FBI to create an electronic case management system called Virtual Case File. That system was abandoned in 2005 after significant management and technical problems with government contractors caused $170 million to be spent on a system that didn't work. [ . . . ]
--Jason Ryan, ABC News, "A Decade and $451M Later, FBI Computers Just Now Working Together," August 1, 2012, at:

http://abcnews.go.com/Blotter/sentinel- ... d=16904032

EDIT: More from the article:
In 2006 the FBI awarded the new Sentinel contract to Lockheed Martin to deploy the system by 2009, but when cost concerns and other issues arose the FBI took over the final deployment and development of Sentinel. When the Bureau took over the project in 2010, they increased the total cost of the system by $26 million to $451 million.
So, $170 million for the one that didn't work plus $451 million for the one that does work: total, $621 million.

I knew the government could do it!
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet
Cathulhu
Order of the Quatloos, Brevet First Class
Posts: 1257
Joined: Wed Apr 07, 2010 3:51 pm

Re: Identity Theft and the IRS

Post by Cathulhu »

Bear in mind that over the last decade IRS has switched their OS from the Integrated Data Retrieval System to the Customer Account Data Engine. Still not state of the art.
Goodness is about what you do. Not what you pray to. T. Pratchett
Always be a moving target. L.M. Bujold
User avatar
The Observer
Further Moderator
Posts: 7502
Joined: Thu Feb 06, 2003 11:48 pm
Location: Virgin Islands Gunsmith

Re: Identity Theft and the IRS

Post by The Observer »

But the problems with erroneous and fraudulent refunds were present at the time IDRS was the main operating program. This problem has more to do with the failure of foresight for effective planning and desing of a database that will lend itself to programming changes on the fly when trends like this one are identified.
"I could be dead wrong on this" - Irwin Schiff

"Do you realize I may even be delusional with respect to my income tax beliefs? " - Irwin Schiff
Cathulhu
Order of the Quatloos, Brevet First Class
Posts: 1257
Joined: Wed Apr 07, 2010 3:51 pm

Re: Identity Theft and the IRS

Post by Cathulhu »

Despite the massively top-heavy management at IRS, they're reactive rather than proactive.
Goodness is about what you do. Not what you pray to. T. Pratchett
Always be a moving target. L.M. Bujold
Judge Roy Bean
Judge for the District of Quatloosia
Judge for the District of Quatloosia
Posts: 3704
Joined: Tue May 17, 2005 6:04 pm
Location: West of the Pecos

Re: Identity Theft and the IRS

Post by Judge Roy Bean »

Cathulhu wrote:Despite the massively top-heavy management at IRS, they're reactive rather than proactive.
But if your "client" is the US House what else do you expect?

There they are, thousands of bureaucrats doing the impossible poorly.
The Honorable Judge Roy Bean
The world is a car and you're a crash-test dummy.
The Devil Makes Three
Kestrel
Endangerer of Stupid Species
Posts: 877
Joined: Sun Jun 05, 2011 8:09 pm
Location: Hovering overhead, scanning for prey

Re: Identity Theft and the IRS

Post by Kestrel »

The thing that galls me the most about this?

The IRS has been forcing electronic filing on us for years, mandating it for any company which crosses certain thresholds and strongly pushing it on everyone else. Yet, after all these heavy-handed mandates, they still prove themselves completely inept at securing what they're forcing us to use.

It's not just the electronic security. Some of the overall policies simply don't make sense.

Can anyone explain why someone should get a rapid electronic refund in January, a week before employers have to submit payroll tax returns, when the IRS doesn't yet have the necessary information to verify the claim?
"Never try to teach a pig to sing. It wastes your time and annoys the pig." - Robert Heinlein
User avatar
The Observer
Further Moderator
Posts: 7502
Joined: Thu Feb 06, 2003 11:48 pm
Location: Virgin Islands Gunsmith

Re: Identity Theft and the IRS

Post by The Observer »

Because the IRS has been told very strongly and repeatedly by members of Congress that they want refunds processed very quickly for their constituents. Veiled threats about operating budgets also get the point across - deliver at all costs and damn the consequences.

But the most simple solution would be for the average citizen to sit down and estimate their tax liability and adjust their withholding so that they just cover the taxes. That way, minimal refunds are not going to cause heartburn if it takes a few extra weeks to process. Instead taxpayers treat the withholding system as a sort of temporary savings account (and with no interest earned) of which the funds they immediately need when the new year cycles in. Far better if they had put that over withheld taxes in an interest-bearing account.
"I could be dead wrong on this" - Irwin Schiff

"Do you realize I may even be delusional with respect to my income tax beliefs? " - Irwin Schiff
Burzmali
Exalted Guardian of the Gilded Quatloos
Posts: 622
Joined: Fri Mar 10, 2006 4:02 pm

Re: Identity Theft and the IRS

Post by Burzmali »

The Observer wrote:Because the IRS has been told very strongly and repeatedly by members of Congress that they want refunds processed very quickly for their constituents. Veiled threats about operating budgets also get the point across - deliver at all costs and damn the consequences.

But the most simple solution would be for the average citizen to sit down and estimate their tax liability and adjust their withholding so that they just cover the taxes. That way, minimal refunds are not going to cause heartburn if it takes a few extra weeks to process. Instead taxpayers treat the withholding system as a sort of temporary savings account (and with no interest earned) of which the funds they immediately need when the new year cycles in. Far better if they had put that over withheld taxes in an interest-bearing account.
Define average citizen. My parents might have been able to estimate their taxes, but I've never been able to due to job and pay changes, and I'm in a stable position compared to many folks.
Quixote
Quatloosian Master of Deception
Posts: 1542
Joined: Wed Mar 19, 2003 2:00 am
Location: Sanhoudalistan

Re: Identity Theft and the IRS

Post by Quixote »

The Observer wrote:But the most simple solution would be for the average citizen to sit down and estimate their tax liability and adjust their withholding so that they just cover the taxes. That way, minimal refunds are not going to cause heartburn if it takes a few extra weeks to process. Instead taxpayers treat the withholding system as a sort of temporary savings account (and with no interest earned) of which the funds they immediately need when the new year cycles in. Far better if they had put that over withheld taxes in an interest-bearing account.
The people most in need of their refunds already have their withholding down to zero. There used to be a way for eligible taxpayers to get half of their earned income credit in their paycheck instead of in a tax refund check. Congress got rid of that last year (or maybe the year before). The child tax credit is also a refundable credit that inflates refund checks.

Many of the ID theft returns don't pass the laugh test. The problem is that computers have no sense of humor. One group of thieves files returns that would never get past a human reviewer, but which have such an improbable combination of income and credits that the filters created by IRS programmers did not filter them out.
"Here is a fundamental question to ask yourself- what is the goal of the income tax scam? I think it is a means to extract wealth from the masses and give it to a parasite class." Skankbeat
Burnaby49
Quatloosian Ambassador to the CaliCanadians
Quatloosian Ambassador to the CaliCanadians
Posts: 8219
Joined: Thu Oct 27, 2011 2:45 am
Location: The Evergreen Playground

Re: Identity Theft and the IRS

Post by Burnaby49 »

The Wall Street Journal comments on this issue in its Friday edition. Its a paywall site so I won't link but I'll post some fair use commentary;

WASHINGTON—Internal Revenue Service supervisors discouraged employees from rooting out fraud in a program that assigns taxpayer identification numbers to non-U.S. residents and others who don't qualify for a Social Security number, according to a report Wednesday from the Treasury inspector general for tax administration.

The management failures—including a focus on processing applications quickly instead of accurately—allowed the creation of fictitious identities, meaning that some people who didn't qualify ended up with a taxpayer identification number, the Treasury inspector general for tax administration found. The result could be fraudulent tax returns, the report said. It didn't quantify the number of such returns, if any, or the extent to which people may have received tax refunds they didn't deserve.

[Snip]

The IRS has been struggling with identity fraud in recent years. In June, the IRS Oversight Board said that the number of total fraudulent returns filed had increased more than fourfold over two years, jumping to 2.18 million last year. Earlier this month, the IRS said that the problem may have been worse than previously thought, and that as many as 1.5 million returns claiming $5.2 billion in fraudulent refunds might have escaped detection last year.
"Yes Burnaby49, I do in fact believe all process servers are peace officers. I've good reason to believe so." Robert Menard in his May 28, 2015 video "Process Servers".

https://www.youtube.com/watch?v=XeI-J2PhdGs