By Patrick Temple-West
WASHINGTON, April 16 (Reuters) – Changes to the U.S. tax
filing process may be needed to fight tax-refund fraud, the top
U.S. tax collector told a congressional panel on Tuesday, a day
after the federal tax filing deadline.
In steps that could lead to slower processing of tax
refunds, Internal Revenue Service Acting Commissioner Steven
Miller said a delay in the start of the tax filing season could
help fight refund fraud.
So might getting taxpayer information more rapidly from
employers, he told the tax-law writing Senate Finance Committee.
Such changes would “not necessarily” mean later issuance of
refunds, “but that’s part of the discussion,” he told Reuters
after the hearing.
Refund fraud, which has exploded in recent years, typically
involves using stolen names and Social Security numbers to file
phony electronic tax forms and refund claims.
Perpetrators then pocket the refund checks that follow,
costing the U.S. Treasury billions of dollars a year, according
to government estimates.
The IRS tries to process and distribute refunds quickly,
often within days. This works against fraud prevention because
the agency does not always corroborate filing information with
third parties, such as employers, before issuing a refund.
Taxpayers can begin filing tax returns in January. Refunds
often get distributed by the IRS before it gets corroborating
information, which sometimes does not arrive at the agency from
employers until after the tax-filing season is over.
Tax professionals have said that corroboration would help
fight refund fraud, but such double-checking takes time.
One change to the filing process might be to wait until the
end of the tax season before issuing refunds. But that could
require the IRS to pay interest on refunds, according to a Joint
Committee on Taxation report.
Earlier this month, senators introduced legislation to
combat the use of taxpayer data in tax-refund fraud scams.
Similar legislation has been introduced in the
House of Representatives.
Separately, the IRS recently lost a federal court case over
its effort to regulate thousands of unlicensed tax-return
preparers. The IRS has appealed the court ruling.
Senate Finance Committee Chairman Max Baucus, a Democrat
from Montana, said the court ruling was “a major setback” for
the IRS.
He said he may consider legislation specifically to grant
the IRS authority to regulate tax-return preparers.
(Editing by Kevin Drawbaugh; Editing by David Brunnstrom)
