IRS Whistleblower Alerts Federal Government to Tax Refund Issue

A recent review of the Internal Revenue Service (IRS) found that the tax agency has done a reasonably good job when it comes to detecting income tax fraud but a poor job as far as stopping refunds from being mistakenly issued. The audit was initiated after an IRS whistleblower came forward with information that the IRS was automatically releasing tax refunds that should not have been issued in the first place.

The audit report, which was issued by the Treasury Inspector General for Tax Administration and examined more than two million tax returns, indicated that the IRS’ monitoring system was successful in preventing more than $15 billion in fraud in 2014, with two-thirds of that fraud coming as a result of identity theft.

However, there was some bad news. The IRS audit also found that the federal agency erroneously released $46 million in tax refunds due to a computer programming mistake. The issue stemmed from a computer glitch that automatically released holds on refunds before IRS agents had a chance to work certain taxpayer cases. With the IRS failing to verify the accuracy of certain data, such as a taxpayer’s reported income and withholding information, the refunds were often issued in error.

At the end of the day, the millions of dollars in potentially invalid tax refunds that were issued pale in comparison to the billions of dollars saved by the IRS’ monitoring and verification divisions. The fear, however, is that a minor mistake could become a major problem if it goes unchecked. J. Russell George, Treasury Inspector General for Tax Administration, issued a statement noting that the IRS needs to do more to ensure that tax examiners “timely complete their verification work before releasing funds.”

To learn more about IRS whistleblowing, check out the FiscalTimes.com article, “IRS Whistleblower Finds Millions in Unverified Refunds.”

If you have knowledge of fraud being perpetrated against the federal government or the NJ or PA state governments, you should speak with a qualified qui tam attorney. Contact the experienced whistleblower and qui tam lawyers at Begelman & Orlow, P. C. today to discuss your options.