The Tax Man Just Doesnt Get It

I normally dont blog about news articles that I read in my local local newspaper, but this article by Dina ElBoghdady in the Washington Post infuriated me: “Costly fraud and error reported in home buyers’ tax program – IRS HAMSTRUNG BY LIMITATIONS Lawmakers consider extension”

This article talks about crooks taking advantage of the $8,000 credit for new home buyers. I know that there will always be crooks in our society, but thats not whats bugging me. The article details a report recently put out by the Treasury inspector general for tax administration. In the report, it states that about $500 million dollars have been wrong fully claimed by over 74,000 buyers. The article goes on to say that these crooks went as far to have their children claim the house credit – the youngest being 4 years old.

Here’s the kicker of the article, when inspector general approached the IRS about not catching this fraud and requiring buyers to attach documentation (to prove the credit applies), the IRS said that the agency “…does not have the ability to accept such documents electronically, nor does it have the legal authority to disallow a claim if the documents are not attached.” Are you kidding me?

I know for a fact that IRS has one of the largest Documentum practice in DC area. Whats the bottleneck in accepting documents? Worst case scenario, have people mail in documentation. We all know that IRS still accepts returns in paper and some of that paperwork must be scanned and OCR’d.

I also know personally that the IRS tracks who buys and sells property. When I purchased my house, I had to fill out a IRS form that contain my SSN and the property address. I’m pretty sure that the IRS also has my birth date associated with my SSN. So, is it that hard to compare my birth date associated with SSN to make sure that I’m old enough to buy a house. Also, if the IRS is tracking large cash flow transactions, it should be able to track whether I have spent a lot of money within last few years.

Even if the IRS does not have the ability to disallow the claim, cant it put those questionable returns in review bucket and flag those people to be audited? If you let someone get away with this kind of fraud today, I’m willing to bet that they will find other ways to commit fraud on their tax returns in the future. I dont mind paying taxes, but I’m frustrated that this money is going to crooks. I’m even more furious that this problem can be stopped if the IRS just put some smart people who understand technology and how to implement an efficient/repeatable process in a room and have them solve the problem. I’m pretty sure they can solve this loop hole without having to spend $500 million dollars. Imagine what the ROI would be if the solution cost $5 million. Even if the project cost $50 million, the ROI is still ten-fold!


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