The IRS and the politics of delay

The Electronic Tax Administration Advisory Committee (ETAAC), convened to provide public input from diverse perspectives to the Internal Revenue Service regarding electronic administration of the taxes, has issued its 2016 Report to Congress (designated as IRS Publication 3415).

The report notes:

More than 80% of all tax filers receive a refund, averaging almost $3,000, and they are not required to authenticate their identities before filing. The IRS can’t validate income and withholding information from third-party sources at the time of filing. Add to that the expectation that the IRS will send refunds within 21 days. This is the ideal environment for Stolen Identity Refund Fraud (SIRF).

In 1979, even before the Internal Revenue Service Restructuring and Reform Act enunciated national policy of preference for the paperless filing of tax returns, testimony at a congressional hearing put both Congress and the IRS on notice that SIRF was a serious problem.  Numerous other congressional hearing witnesses have since corroborated the 1979 testimony.

There is no doubt that the use of identity theft to defraud the public fisc has long been a serious problem, nor can it be denied that those whose identities have been expropriated by the identity thieves suffer consequences far beyond the monetary.  American Thinker postings (including others in addition to my own) have already detailed the matter.

This year's report declares that "[i]n 2017, ETAAC will shift its focus to primarily addressing the serious problem of tax identity theft abuses, which threaten to erode the integrity of the tax system. In this report and in future reports, ETAAC will provide strategic and tactical recommendations on combating tax identity theft."

ETAAC reports from previous years have certainly noted identity theft issues but, until now, have failed to squarely address the IRS's negligent complicity in the process.  For its part, the IRS is under significant pressure to expeditiously issue tax refunds.  Whether Democrat or Republican, our Congresscritters are keenly aware of their constituents' dependencies upon income tax refunds from the IRS.  IRS commissioner Koskinen's unpopularity in Congress does not position him well to resolve the conflicting imperatives of a speedy refund on one hand and adequate verification of the tax return information and the refund recipient's identity on the other hand.

One can only hope that ETAAC is ending what effectively has amounted to the rubber-stamping of Congress, and that its future reports will squarely lay out the dilemma between fast refunds or effective scrutiny.  Allowing the continued plunder of the Treasury will have loud repercussions, but delaying the refunds carries both economic and political stakes.

Whether on the part of a Congresscritter, a high-ranking IRS bureaucrat, or Commissioner Koskinen himself, insistence that refunds be delayed pending adequate verification of tax return and taxpayer information would be a real profile in courage.

Kenneth H. Ryesky, now a senior adviser with the U.S. Desk of Ernst & Young's International Tax Services in Tel Aviv, is a lawyer who has taught business law and taxation at Queens College CUNY.  He formerly served as an attorney for the IRS.  The viewpoints expressed here are his own.

The Electronic Tax Administration Advisory Committee (ETAAC), convened to provide public input from diverse perspectives to the Internal Revenue Service regarding electronic administration of the taxes, has issued its 2016 Report to Congress (designated as IRS Publication 3415).

The report notes:

More than 80% of all tax filers receive a refund, averaging almost $3,000, and they are not required to authenticate their identities before filing. The IRS can’t validate income and withholding information from third-party sources at the time of filing. Add to that the expectation that the IRS will send refunds within 21 days. This is the ideal environment for Stolen Identity Refund Fraud (SIRF).

In 1979, even before the Internal Revenue Service Restructuring and Reform Act enunciated national policy of preference for the paperless filing of tax returns, testimony at a congressional hearing put both Congress and the IRS on notice that SIRF was a serious problem.  Numerous other congressional hearing witnesses have since corroborated the 1979 testimony.

There is no doubt that the use of identity theft to defraud the public fisc has long been a serious problem, nor can it be denied that those whose identities have been expropriated by the identity thieves suffer consequences far beyond the monetary.  American Thinker postings (including others in addition to my own) have already detailed the matter.

This year's report declares that "[i]n 2017, ETAAC will shift its focus to primarily addressing the serious problem of tax identity theft abuses, which threaten to erode the integrity of the tax system. In this report and in future reports, ETAAC will provide strategic and tactical recommendations on combating tax identity theft."

ETAAC reports from previous years have certainly noted identity theft issues but, until now, have failed to squarely address the IRS's negligent complicity in the process.  For its part, the IRS is under significant pressure to expeditiously issue tax refunds.  Whether Democrat or Republican, our Congresscritters are keenly aware of their constituents' dependencies upon income tax refunds from the IRS.  IRS commissioner Koskinen's unpopularity in Congress does not position him well to resolve the conflicting imperatives of a speedy refund on one hand and adequate verification of the tax return information and the refund recipient's identity on the other hand.

One can only hope that ETAAC is ending what effectively has amounted to the rubber-stamping of Congress, and that its future reports will squarely lay out the dilemma between fast refunds or effective scrutiny.  Allowing the continued plunder of the Treasury will have loud repercussions, but delaying the refunds carries both economic and political stakes.

Whether on the part of a Congresscritter, a high-ranking IRS bureaucrat, or Commissioner Koskinen himself, insistence that refunds be delayed pending adequate verification of tax return and taxpayer information would be a real profile in courage.

Kenneth H. Ryesky, now a senior adviser with the U.S. Desk of Ernst & Young's International Tax Services in Tel Aviv, is a lawyer who has taught business law and taxation at Queens College CUNY.  He formerly served as an attorney for the IRS.  The viewpoints expressed here are his own.