One week after our 2013 federal tax returns were due, Iowa Senator Chuck Grassley is criticizing the Internal Revenue Service for its antiquated fraud detection system. An investigation is still underway after several dozen employees at the University of Northern Iowa discovered earlier this year that their tax information had fallen victim to tampering. “Identity theft to commit tax fraud is a $5-billion per year problem,” Grassley says. “The IRS puts taxpayers at risk for fraud by using inadequate systems and delaying a better system.”
One report finds the IRS paid more than $5 billion in potentially fraudulent tax refunds on 1.5 million returns in tax year 2010. Grassley, a Republican, says there’s no excuse for those monumental errors. “It’s an even bigger concern if the new system isn’t in place by the time the number of people filing tax returns increases under Obamacare next year,” Grassley says. “That’s going to be a big problem for IRS.”
Grassley says the federal health care plan allows for refundable credits, which he says are especially vulnerable to fraud, and millions of new taxpayers will be filing returns next year thanks to the Affordable Care Act. “So IRS better get on the ball and get this taken care of,” Grassley says.
The agency’s current Electronic Fraud Detection System may not be operable beyond 2014, he says, while the new system, the Return Review Program, has been under development for five years and still isn’t ready to roll out. It’s being designed to automate many tax fraud detection tasks that are now performed by employees.