Identity Theft and the IRS

[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

[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]

And this is the operation that's going to be part of saving us money on health care.

[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!

[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.

[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.

[Cathulhu]

Despite the massively top-heavy management at IRS, they're reactive rather than proactive.

[Judge Roy Bean]

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.

[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?

[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.

[Burzmali]

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]

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.

[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.