THE CASE AGAINST EFILING
by Jay Starkman, CPA
The author wishes to thank Lew Regenstein, Tom Ochsenschlager, Joe Scutellaro, Jean Nelsen, and Kirit Kanakiya for their invaluable assistance, though not necessarily concurrence, in writing this article.
Jay Starkman argues that efiling creates tax complexity, higher compliance costs, and the risk of audit and penalties, and it encourages cheating so extensive that tax fraud is now the third largest theft of federal funds.
Copyright 2012-2015 Jay Starkman.
All rights reserved.
Intuitively, it seems that efiling has benefits for all stakeholders in tax compliance, particularly from the efficiency it brings through lower operating costs. But in many ways, that's not true.
Efiling has added to tax complexity, increased compliance costs, raised penalties, created a higher audit potential, and facilitated cheating so extensive that tax fraud is now the third-largest theft of federal funds after Medicare/Medicaid and unemployment insurance fraud.
The Justice Department website lists one conviction a day for tax fraud,1 but few concern boiler room efile fraud and rarely for thefts over $1 million, while the fraud totals in the billions. The problem is so widespread that IRS has quietly set a $100,000 threshold before investigating and prosecuting these cases.1a Its Criminal Investigation division in 2012 initiated just 898 identity fraud cases, with 223 convictions averaging 48-month sentences.1b Meanwhile, classes of 50 to 100 people at a time are being taught how to file fraudulent returns while IRS is saddled with 660,000 identity theft cases.2
Efiling is extremely popular. IRS says 89 percent of preparers efile at least some returns3 and 84 percent of individuals currently efile.4 Congress mandated in 1998 that "paperless filing should be the preferred and most convenient means of filing Federal tax and information returns [and] it should be the goal of the Internal Revenue Service to have at least 80 percent of all such returns filed electronically by the year 2007."5 That 80 percent goal was achieved for Form 1040 in the 2012 filing season.
Efiling is even more popular with criminals. 91 percent of fraudulent return are efiled and 82 percent use direct deposit.5a Efiling tax fraud has exploded from 51,700 cases in 2008 to over 1.1 million in 20115b and the Treasury Inspector General for Tax Administration found 1.5 million more resulting in an additional $5.2 billion in unjustified refunds. This is in addition to an estimated $11.6 and $13.6 billion in improper earned income tax credit payments, which IRS does not count as fraud.5c
The problem is still growing. Sixty-three percent of CPAs who answered the 2015 tax software survey conducted by The Tax Adviser and Journal of Accountancy said at least one of their clients was a victim of tax identity theft in the 2015 filing season; as high as 15 percent of their clients in a few cases. 5d
This being the computer age, 100 percent efiling of tax returns is probably inevitable as it should be but in many circumstances it is actually a disservice to taxpayers and preparers in its current form. Here's why efiling has become such a problem:
The e-input and existence of intermediaries are the source of much friction. By contrast federal courts require efiling into the public access to court electronic records (PACER) system, but that's a relatively simple standard PDF/A format with time and cost savings to all parties.
EINs are required for each interest and dividend payer listed on Schedule B. Because of efiling, IRS can administer the program for Obamacare,8 the new Form 1099-K, "Merchant Card and Third-Party Network Payments,"9 and multiple Forms 8949, "Capital Gain/Loss."10 It costs IRS very little to require all this extra tax complexity, which would not be the case with a paper return that IRS had to keypunch or scan and verify. The cost is skewed toward taxpayers and preparers.
I often leave town on the morning of April 15. Efiling would require me to plan on staying in town another eight business days after April 15 to avoid rejection and late filing for efiled returns with error codes that must be "perfected" within the required time.
The highest rate of return rejects reportedly occurs for IRS master file mismatches such as a mismatched name or Social Security number. Some are the result of inaccuracies in the master file, which may require refiling with a paper return. Intuit Inc. was granted Patent No. 8,126,786 in February 2012, covering the handling of error codes,11 apparently not barred by a law that bans the patenting of tax strategies.12
Small Practice Paperwork
1. returns must be forwarded to clients for review and approval;
2. after the client has reviewed and approved the return, the preparer must obtain a signed Form 8879, "IRS e-file Signature Authorization," before efiling;
3. the preparer must then wait for tax authorities' error codes and correct them before the return is accepted by IRS; and
4. after any error codes are cleared, the preparer must mail some paper forms that cannot be efiled with Form 8453, "U.S. Individual Income Tax Transmittal [of Attachments] for an IRS e-file Return," within three days after receiving acknowledgement that IRS has accepted the return.13
Efiling may save time by avoiding the printing, collating, and postage involved in paper filing, but those repetitive steps are replaced by more complex efiling steps. For large practices, efiling can be routine, even a timesaver. For small practices (under 100 returns annually), this can be especially cumbersome.
Not all practitioners wait for clients to review and approve the return before efiling. Practitioners cannot always easily track down clients who fail to return written permission. The requirement for the signed Forms 8879 forces the preparer to take time to contact clients and remind them to respond so that their tax return can be timely efiled. With Form 8879, an abusive spouse no longer needs to give an excuse to gain the signature of the other spouse on a blank tax return. States have their own requirements. New York preparers must obtain Form TR-579-IT, "New York State E-File Signature Authorization," from the client before efiling.
Under Legacy eFile, efiling is prohibited for filing from overseas or with a foreign address (not even a foreign rental property address on Schedule E), nor is it allowed for a nonresident alien or any amended individual return. Modernized eFile (MeF), when implemented by preparation software, will accept many of these returns.
Registered domestic partners in California, Nevada, and Washington, and married filing separately with community property income, require an allocation worksheet to be attached to the return. Some software using MeF permit the allocation worksheet to be attached as a PDF and filed electronically.
Still, this may trigger error code 0119 or 1094 if the taxpayer's address isn't in an appropriate community property state.15 Some error codes require paper resubmission of previously efiled returns.
Victims of tax identify theft must file on paper when the thief has filed a fraudulent return before the real taxpayer files. The IRS will provide a six-digit identity protection personal identification number (IP PIN) that allows victims to resume future efiling.16
One must watch for these exceptions and file on paper when they arise. Usually, preparation software will alert the preparer. Time spent studying bifurcation rules detracts from study of real tax law. Paper-filing a return that was expected to be efiled can be disruptive to work flow.
The IRS is slowly addressing these problems. MeF permits attaching PDF pages of forms and disclosures. It will eventually replace the Legacy eFile system, thereby retiring Form 8453 and resolving most bifurcation issues. There are also state efile rules, which are different from federal, to contend with.
However, a return efiled on April 15 and rejected with error codes that are not corrected within the requisite five days is treated as an un-filed return because it was never accepted by IRS.17 For this reason, some practitioners file an extension request on all efiled returns for which a "no error code" confirmation hasn't been received by April 15. A properly signed and addressed paper return that is mailed on April 15 and actually delivered to IRS with postage prepaid is always timely filed. Timely postmarked certified mail will be considered timely filed, even with insufficient postage or if undelivered by the postal service.18
Fraud and Identity Theft
Fraudulent tax returns consist of tax identity theft, refund fraud, and return preparer fraud. They are overwhelmingly efiled. This minimizes evidence. There are no signed tax forms, envelopes, or fingerprints, and efiling promises quick refunds.
Investigators find that the paperless electronic fraudulent return usually leads to an untraceable dead end. The Social Security Administration doesn't have complete Form W-2 information before May.19 The IRS posts Forms W-2 to taxpayer accounts much later. Forms 1099, which are mostly efiled directly with IRS, aren't available system-wide until mid-June. So issuing tax refunds is based largely on trust and software screening filters. The IRS does screen some 335,000 returns of Puerto Rican citizens who have had their U.S. SSNs compromised in a major identity theft scheme.20
One IRS initiative has been to contact employers by phone or fax to verify the W-2 information on a suspicious return. Several employers have questioned the legitimacy of the faxes, because they appear to be part of a scam.20a
Fraud is a major problem for states, too. A 25-year-old Oregon woman was accused of filing a fraudulent state refund return reporting wages of $3 million and claiming a $2.1 million refund. So weak were the internal controls that Oregon authorized the refund, and TurboTax issued her a Visa debit card for the full $2.1 million. She was an amateur. The state admits it might not have discovered the fraud if the woman hadn't reported the card lost or stolen after making $150,000 worth of charges in three months, but not before first issuing her the replacement card upon which she continued her shopping spree. Three Oregon employees were repremanded and one was demoted, but no one was fired.21
Organized crime gangs are now increasingly involved in tax refund fraud and tax identity theft.22 Tax identity theft is now "Most Serious Problem #3" in the latest report by the national taxpayer advocate. There were 226,000 cases in 2011, a 20 percent increase over 2010. IRS statistics reveal that over 1.5 percent of filings are fraudulent refund returns.23 A new TIGTA report claims 1.5 million additional undetected potential identity theft returns over and above the 2,176,657. bringing the fraud percentage above 2.5 percent.23a
It's so easy to hide one's tracks when efiling. IRS can track the IP address to identify where the fraudulent return originated. TAILS is a Debian-based Linux distribution designed to run off a live DVD or live USB. It uses Tor to hide your real IP address, making you untraceable. The beauty of TAILS is that there are no tracks left on your computer's hard disk.23b
State percentages are so much higher that it makes the 2.5 percent estimate suspect as too low. During fiscal 2011, Georgia identified 172,908 suspected fraudulent returns, only 109,884 of which were detected before the release of funds. With 4.4 million individual returns (76 percent of which were efiled), Georgia reports almost 4 percent fraud.24
IRS dismisses TIGTA projections of tax fraud losses, placing its faith in new software filters. It is impossible for filters to anticipate all situations, especially given our ever-changing tax laws. Good software is very expensive, so a cost-conscious organization must accept risk.24a Congress should inquire of IRS what rate of fraud and how many billions of fraud losses it plans on tolerating, and how much IRS needs to spend to bring it down to that level.
It is not difficult to efile using a real name and SSN (widely available in most medical records, insurance applications, and every credit or employment application25) with a phony Form W-2 or fabricated Schedule C income. The refund can be posted to an anonymous "Green Dot" prepaid Visa or MasterCard purchased at a drug store, which has a routing number and account number suitable for direct deposit that is hard to distinguish from a bank account. The IRS will even correct a fraudulent return to refund the estimated taxes that the real taxpayer remitted, when the fraudster claims only refundable credits, as happened in the 2011 filing season to one of my victimized clients.26
The treasury inspector general for tax administrator and the national taxpayer advocate have both harshly criticized the lack of IRS assistance to victims. If you suffer a tax identity theft, you'll likely have a hard time getting cooperation from IRS.27 She has been recommending for years "allowing taxpayers the option to turn off the ability to file electronically" as a means of protection against efiling identity theft. The worst outcome is when IRS forwards false self-employment income of a disabled person in an assisted living facility to the Social Security Administration, which then terminates the victim's Social Security benefits, potentially causing the facility to discharge the patient.28
In April 2012 testimony before Congress, IRS claimed that it identified and prevented the issuance of more than $14 billion in fraudulent refunds.29 The Treasury Inspector General for Tax Administration at the same hearing said that IRS claimed last year it detected approximately 940,000 tax returns involving identity theft and prevented the issuance of $6.5 billion in identity theft refunds, adding, "We have found that the issuance of fraudulent tax refunds based on false income documents is significantly greater than the amount detected and prevented by IRS."30 It seems IRS doesn't know how many identity thieves are filing fictitious tax returns or how much revenue is lost as a result of issuing fraudulent tax refunds.31
The problem keeps growing. In a February 2015 report, IRS estimated that it paid $5.8 billion in fraudulent identity theft refunds, while claiming that it prevented $24.2 billion in the 2013 filing season.31a
A prime target for both paper returns and efiling fraud is the earned income tax credit. In March 2011 TIGTA estimated improper EITC payments at $16.8 billion in 2010, up from $12.35 billion in 2009 -- second only to Medicare/Medicaid and unemployment insurance improper payments.32 For the 2012 fiscal year, TIGTA reports only $11.6 to $13.6 billion in improper EITC payments, with caveats that this may not be an improvement. On identity theft, TIGTA has just reported about 1.5 million additional undetected tax returns with potentially fraudulent tax refunds totaling more than $5.2 billion.33
Another tempting target of fraud is the easy availability of the dependent child exemption for non-U.S. dependents living in Mexico and Canada,34 even by illegal aliens using an ITIN. "Solicita tu ITIN aqui," which appears on the entrance door of a prominent commercial preparer service, looks like a disguised appeal to illegal immigrants for help in obtaining ITINs.
An undocumented alien can obtain an ITIN35 and many do. About 80 percent of ITIN income tax returns claim refunds even though an ITIN submitted with a Form W-2 should (but generally doesn't) raise a red flag because an ITIN can't be used for employment.36 Most of those filers do so electronically, and practitioners are well aware that those filers often shop for preparers who promise the biggest refunds.
Since 2007, IRS has permitted efiling for returns with a mismatch between the ITIN used on the return and the SSN appearing on Forms W-2. "IRS recognized that many ITIN owners earn wages reported by employers under SSNs of other taxpayers, and did not want to keep these taxpayers from efiling."37 While IRS decries compromised SSNs and efile fraud, it abets these unlawful activities when combined with an ITIN, and promises a quick refund. As wage income is generally subject to overwithholding, it would be unusual for those returns to show a balance due, thus raising the likelihood of fraudulent activity.
It is extremely difficult for IRS to police dependents who are claimed to be living in Mexico. Ditto children, nieces, and nephews with ITINs whom the immigrant with earned income claims are living with him in the United States so that he can reap outsized refundable child credits.38
ITINs became a source of tax identity theft sometimes used by undocumented workers to claim child care and other tax credits to which they were not entitled. So IRS recently restricted the issuance of new ITINs to applicants who submit original identifying documents such as a birth certificate or passport.39
IRS responded with new harsh now procedures for issuing ITINs. They will now be valid for five-year periods, rather than indefinitely. Only original documents such as passports and borth certificates, or certified (not notarized) copies from the issuing agency will now be accepted. Certifying Acceptance Agents who help the IRS process ITIN applications must complete forensic training to effectively recognize fraudulent documents, particularly passports, driver's licenses, birth certificates, visas, national identification cards, military and U.S. State ID cards. These new rules have caused hardship for legitimate ITIN applicants and a rebuke from the Taxpayer Advocate Service.
Efiling changed that. In 2010, prisoners efiled 91,434 fraudulent returns, up from 18,103 in 2004. For the nine months ended June 30, 2012, IRS has detected 173,106 fraudulent prisoner returns and was able to stop 156,482 fraudulent refunds totalling $2.1 billion from being issued.39a
In response to IRS requests, Congress allowed IRS to disclose directly to the warden at both state and private contractor prisons when it suspected a prisoner of having filed a false return.39b The expectation was this would lead to summary punishment and be considered at a parole hearing.
This proved insufficient as IRS didn't know whether a filer was serving in prison. So, the 2011 U.S.-Korea Free Trade Agreement Implementation Act included a provision that annually, every federal and state prision must report to IRS the names, social security numbers and other information on every inmate.39c
Prisoners specialize in some unusual efiling frauds, in addition to the standard ones such as identity theft and false W-2s, Popular prisoner schemes include claiming withholding on original issue discount bonds, because IRS couldn't easily cross-reference Forms 1099-OID. One prisoner was getting refunds of $300,000 to $400,000 per year by filing multiple returns requesting $3,000 to $6,000 refunds each. For a $100 to $1,000 payoff, another prisioner will prepare a fake tax return for a fellow inmate.39d About ten percent of fraudulent prisoner returns originate in California, and no wonder, given that Mexicans here illegally can use ITINs relatives' children living in Mexico to maximize refunds.
Want to get a prisoner into trouble? Just file a false return in his name. Summary judgement will prevent him from mounting an effective defense.
Except for the simplest returns, a thorough review of a self-prepared return using off-the-shelf software often reveals significant problems. At his 2009 confirmation hearing, Treasury Secretary Timothy Geithner partially blamed his failure to pay self-employment tax on income from the IMF on TurboTax software. He claimed it wasn't formatted "in a way that caught" his embarrassing mistake.41 TIGTA tested five 2003 tax return preparation software packages and found that four of them prepared incorrect tax returns using facts presented in the tests. The software didn't even flag some potential issues.42
The IRS could start by checking software for inflated charitable deductions on used clothing and household goods valuations.43 Enhancements to software that produce even small improvements in voluntary compliance could yield billions in additional revenue. Preparers using off-the-shelf software or FreeFile instead of a paid commercial program risk discipline, since this is a complaint item taxpayers can make against preparers on Form 14157, "Complaint: Tax Return Preparer."
The IRS doesn't fully monitor the tax software industry's compliance with established security and privacy standards, nor does it have the capability to receive efiled returns directly from individual taxpayers without an intermediary.
According to the Government Accountability Office, IRS doesn't know whether the confidentiality and integrity of taxpayer data are adequately protected by efile providers.44 Unfortunately, revelation on October 26, 2012 of the electronic theft of 3.8 million unencrypted tax records from the South Carolina Department of Revenue exposed the fact that there are no nationwide encryption standards.44a Paper filers avoid such exposure from intermediaries, but remain exposed to hacking after electronic transcription to government servers. Reg. §301.7216-2(d)(1) provides for an exception to the penalties for disclosure of tax return information to efile providers and electronic return originators, so efiled return information is stored on servers, the security of which is not verified.
Efiled returns are sent to a contractor who then forwards them to IRS for example, Intuit TurboTax.44b That firm typically retains your data to prove the return was delivered. Intuit isn't a safe repository. In early February 2015, many states had identified thousands of potential identity theft tax returns filed using TurboTax. In a lawsuit filed soon thereafter, it was alleged that two former Intuit security employees reported the company had made millions of dollars in knowingly processing state and federal tax refunds filed by cybercriminals; that Intuit had not implemented a basic two-step authentication process used by many large companies; and that when the security team found millions of TurboTax accounts used exclusively for filing fraudulent returns, Intuit management expressly forbade flagging or turning off such TurboTax accounts lest the fraudsters take their tax fraud business to TurboTax competitors. FBI and IRS criminal investigators are looking into the TurboTax incident to determine the extent of the fraud and how it was perpetrated. The lawsuit alleges that Intuit failed to notify customers when their personal information as maintained by Intuit had been improperly used to file fraudulent tax returns. 44c
Paper filing is the only way to avoid sharing your tax information with the undisclosed contractor.44d New IRS guidance on identity verification of clients has resulted in some software vendors disclosing the taxapayer's entire tax return to an identity verification vendor during the taxpayer's e-signature process. This raises concerns about clients' reasonable expectations for data confidentiality and the risks inherent in transmitting a tax return to yet another third party. 44e Now, a credit bureau (and Intuit) can have ALL your financial secrets.
Paper returns are much more secure since the postal service not only guarantees privacy, it maintains a very active postal inspector office to investigate improprieties. (See comment section below.)
E-Payments and E-Refunds
This is possible because, unlike any other electronic bill payments, IRS is lax about issuing refunds. Moreover, accounting controls over the electronic federal tax payments system (EFTPS) at both the bank and IRS appear to be weak. This could be the next big criminal tax fraud.
For those who file early by efile or paper, an EFTPS payment can be delayed to withdraw funds from the taxpayer's bank account on the exact due date, which avoids giving the government any float and avoids problems with a lost or mishandled paper check. A check can be mailed on the return due date, unlike an EFTPS deposit which must be initiated at least one day prior. Though an EFTPS payment can be warehoused until April 15, a check might take a week to cash if mailed on April 15.
Paper refund filers are often penalized. IRS refunds take weeks longer absent efiling. New York provides that a paper-filed tax document requesting a refund will not receive statutory interest. Nebraska advises individuals filing paper returns to allow at least four months to receive their refund.
E-refund through direct deposit and debit cards is now the government-preferred refund method. States benefit by not printing checks or dealing with lost checks. Direct deposit assures banks that the customer can't close his account before the refund posts. Card issuers charge for a denied transaction, speaking with a live agent, failure to use the card, and, in some states, transaction fees for using the card.46 A Treasury debit card pilot program that cost $1.5 million was suspended in October 2011 after only 2,000 of the 808,000 taxpayers contacted elected to participate.47
For the preparer, there's potential liability for efiling with incorrect routing information. With a paper return, that space can remain blank for the client to fill in.
Sometimes, unscrupulous preparers will misappropriate refunds by changing the routing number on a return. When this happens, the IRS position is that the refund was paid according to instructions it received, and the taxpayer's sole recourse is to pursue the matter in a civil lawsuit against the return preparer. With a paper check, the Service would issue a replacement check once it verified that the original refund check was lost or stolen and therefore uncashed by the taxpayer.48
Unscrupulous preparers have also been known to revise deductions without the client's knowledge after they returned a signed Form 8879. That will increase the refund sent to the client's refund anticipation loan (RAL) account at the bank and the excess refund was later transferred to the preparer's account as preparer fees.49 Or Form 8888, "Allocation of Refund," can be added to route the excess to the preparer's account. In a major pending case, a national tax preparation service and lender is charged with filing unauthorized income tax returns and charging undisclosed and exorbitant fees for tax preparation services.50 Those frauds can only be perpetrated with efiling.
Potential preparer problems can also arise if he inputs the taxpayer's EFTPS account information for a tax payment via an Automated Clearing House (ACH) debit. In addition to other costs, there's a new two percent penalty for a bounced ACH debit payment51 and liability to the preparer who caused the error through an erroneous tax form entry.
An unexpected security problem is the IRS itself. The GAO reported that IRS allowed users to have excessive privileges to an application used to process electronic tax payment information, failing to limit the ability of users to enter commands using the application's user interface. As a result, users could access or change tax payment-related data.51a
Stolen PTINs are being used by criminals to help make fraudulent returns appear legitimate and thwart IRS screening software. The IRS is considering issuing IP PINs to preparers to use with their PTINs. The Freedom of Information Act obligates IRS to release to the public, on request, a PTIN holder's name, business name, business website address, business phone number, business mailing address, email address, and professional credentials. Probably the PTIN, too. "It's highly unlikely that we could prevail in a challenge under FOIA and actually be able to withhold PTINs," said David Williams, director of the IRS Return Preparer Office.52 Practitioners also worry about release of their email addresses.
My PTIN application doesn't list or require my email address, because I file the annual Form W-12, "IRS Paid Preparer Tax Identification Number (PTIN) Application and Renewal," on paper. And because I haven't registered to efile, IRS should reject any fraudulent efiled return listing my stolen PTIN (at least I hope so).
I'm amazed to see preparers lined up at IRS Tax Forums to submit to fingerprinting, a prerequisite for efiling by those who aren't members of exempted professions. (The IRS is considering fingerprinting as a requirement for PTIN applicants, too.) A commercial tax return preparer must pay New York a $100 registration fee if he prepares 10 or more N.Y. "tax documents" annually. An extension request counts as a tax document.
Perhaps it's a good idea to regulate preparers. There certainly are abuses.53 Yet TIGTA says it's unclear how regulating preparers will lead to increased accuracy in return preparation and less efiling fraud, and whether the benefits warrant the regulations' increased cost to the government, preparers, and taxpayers.54 More than 844,000 preparers have registered,55 and that alone collectively costs out of pocket at least $53 million annually.
Congress believes penalties are a solution, since it last year increased the preparer penalty for noncompliant EITC returns from $100 to $500.56 The IRS believes the solution is more paperwork for preparers since it now requires Form 8867, "Paid Preparer's Earned Income Credit Checklist," with each tax return claiming the EITC.57 Tax simplification might work better.
Any preparer who wants to efile must apply to IRS to become an electronic return originator (ERO). Only U.S. citizens or legal aliens over age 21 are eligible to register as EROs.58 Accenture PLC, now an Irish company having originally been incorporated in tax haven Bermuda, administers the PTIN program (which is separate from the ERO program). CCH, whose software is widely used by EROs, is owned by Wolters Kluwer NV. So while only U.S. persons may efile, an Irish company has access to preparer personal identification information and a Dutch company has access to taxpayer information.
New York is perhaps the strictest, requiring efiling by all preparers of more than five tax documents, without any provision for clients to opt out, subject to a $50 penalty each on the preparer and his non-individual client for failure to efile. Treasury has added willful failure to efile to Circular 230, subjecting holdouts to possible disbarment from practice and monetary penalties.60
To "encourage" more efiling, the Electronic Tax Administration Advisory Committee recently proposed lowering the 250-return thresholds to 75, mandating that amended returns be efiled if the original returns were efiled, and increasing the penalty for manually filed information returns with erroneous TINs to $150 each (from $100 currently).61
U.S. citizens and green card holders are required to file annual Treasury reports when they own or have signature authority over a foreign financial account. In 2014, Treasury mandated this must be filed electronically. The form is not that complex. However, it cannot be filed electronically from abroad and there's no provision for someone residing abroad to file on paper. The penalty for failure to file is a draconian 50 percent of the highest balance in the account during the year, per year.
On Thursday, January 20, 2011, the Georgia Department of Revenue issued direct deposit refunds to 32,423 taxpayers totaling $12 million. It soon discovered a computer miscalculation resulting in overpayments of around $630,000. So on Monday, January 24, it ordered banks to return the $12 million, in effect recalling the electronic deposit and causing many checks written by refund recipients to bounce.63
Didn't know an electronic deposit could be recalled? It's written into the ACH agreement you signed with your bank.
Late 2010 tax law changes resulted in processing delays at IRS. Individual income tax returns that itemized deductions weren't accepted until February 14, 2011. Another unspecified problem caused the Service's efile system to reject 2010 returns submitted by taxpayers who listed their age or their spouse's age as 64 and claimed an EITC.64 (A preparer efile mandate would prevent preparers from trying to avoid that problem by paper filing in future years.)
To reduce efiling fraud, IRS during the 2012 tax filing season delayed paying refunds while it checked questionable returns. This affected preparers who had charged clients extra for instant or faster refund services and taxpayers relying on the promise of a quick refund through efiling.65
The IRS claims that its screening filters can now better identify tax returns claiming fraudulent refunds, but many honest filers are also affected and inconvenienced.66
The faulty IRS electronic fraud detection system was included as "Most Serious Problem #2" in the national taxpayer advocate's 2011 report.67 "Taxpayer expectations on refunds may have to change," Steven T. Miller, IRS deputy commissioner for services and enforcement, told the Council for Electronic Revenue Communication Advancement on May 16.68
MeF system programming problems resulted in IRS issuing an alert on February 10, 2012, to efile providers encouraging them to revert to the Legacy eFile system rather than use MeF.69 There's also the "annual power outage and electrical upgrades" which IRS advertises in advance (eg, five and a half days "beginning approximately 1:00 am ET on Thursday August 30, 2012 until approximately 12:00 pm ET on Tuesday, September 4, 2012") affecting certain online services such as applying for a TIN, installment application, or efiling PIN and "Where's My Refund" or first-time homebuyer credit account lookup.
The IRS claims its policy is to post the same information from efiled and paper returns to its databases, so that similar paper and efiled returns have equal chances of being audited.72 But it seems logical that efiling increases the risk of an audit because e-input ensures that every line is automatically entered in the efile database.
In any event, efiling gives IRS instant access to those returns for determining audit potential. With paper returns, it can take up to six months before the return is keypunched and processed into the database and reviewed for audit potential. This allows that much less time before the three-year statute of limitations expires.
Buried in GAO reports are the benefits from efiling that IRS can realize through automated auditing and audit selection:
IRS officials said that having more tax return information available electronically would improve audit selection, thus reducing burdensome audits for compliant taxpayers. [Manually transcribing the 20 percent of returns filed on paper] would require 1,714 full-time equivalent staff, costing about $71 million, for fiscal year 2012. However, IRS officials told us that IRS does not have funding at this time to transcribe all the remaining data lines from paper returns.72a
Once IRS makes efiling nearly universal, it will certainly review the e-input database for audit potential. That might provide a lower audit risk for holdout paper filers. Years ago, IRS made significant efforts to fight the myth that using preprinted IRS peel-off labels on tax returns would increase audit risk. But despite repeated informal requests from professional groups, IRS has not made a similar public pronouncement that efiling has no effect on audit risk.
The annual IRS Publication 17, Your Federal Income Tax, Table 1-4, "Benefits of IRS e-file" for the years 2003 - 2007, announced, "The chance of being audited does not differ whether you e-file or file a paper tax return." This announcement was dropped from Table 1-4 in the 2008 and subsequent Publication 17's.
Efiling reduces a preparer's postage costs since he sends the client only a "taxpayer's copy" because the tax agency copies will be efiled. Sending the client his copy via secure email or a secure portal, and the client's submitting his efile authorization to the preparer via similar means or fax, can completely eliminate mail and reduce handling costs, as well as speed the filing process.
The IRS claims that in fiscal 2011 efiling cost only 15 cents per return, while a paper-filed return cost $3.50 to process.73 Each year, efile costs keep dropping and paper costs keep rising. Efile was 17 cents in fiscal 2010, while paper filing allegedly cost $3.66.74 Before that, it was 19 cents and $3.29.75
With 80 percent of returns efiled, this suggests that either efiling costs just $17 million system-wide or that the 15 cents claim is grossly understated. Surely, this understatement excludes the huge continuing investment in hardware and software technology to process electronic returns and maintain security. Of the IRS cost estimates, the GAO has said, "we cannot independently verify this estimate and its basis is unclear because IRS's cost accounting system is not yet able to support preparation of such cost estimates."76
Despite closing service centers and ballooning efile compliance, the IRS budget for "Filing and Account Services" for the past few years remains $1.73 billion,77 which calculates to $12 per return, plus an additional $300 million budgeted annually for "capital asset acquisition of information technology systems." The IRS employs 65 full-time equivalent staff just to process preparer efile applications, surely a $3 million budget item in itself. The IRS estimates that it costs over $21 to screen each potentially fraudulent return.78 With 2,176,657 fraudulent returns detected last year (940,000 of which involved identity theft), this alone represents $46 million of efile overhead.79
The paying of detected and undetected efiled fraudulent refunds costs the government billions of dollars. It's an off-budget cost, so it doesn't count against the $12 billion IRS annual budget in calculating the overall cost of efiling.
Many commercial tax return preparers compete by promising prospective customers ever-larger and faster refunds. Customers shop around for the best deal. In the 2007 filing season, 165 Jackson Hewitt franchises were accused of filing fraudulent returns claiming bogus deductions and EITCs.80
Tax software companies do similar marketing. "Let's get your guaranteed biggest tax refund" and "Maximum Refund Guarantee" appear at prominent websites. (The fine print limits guarantees to the price paid for the software.) Some offer professionals the option of deducting the preparation fee directly from a client's refund. Many offer refunds in the form of prepaid Visa and MasterCard.
Paper Is Popular
The best thing IRS can do now is to allow taxpayers the option to turn off the ability to file electronically, as recommended by the national taxpayer advocate, so they can protect themselves against identity theft. If IRS won't do this, Congress should amend §6011(f) to provide this option.
Given the current out-of-control tax fraud, backing away from mandatory efiling in §6011(e)(3) combined with a taxpayer opt-out flag could result in a multi-billion-dollar revenue boost and be portrayed as an actual revenue offset for a tax cut or spending program.
Form 14039, "Identity Theft Affidavit," so that IRS might apply additional return screening or issue an IP PIN.81 Taxpayers may also request a one-time electronic filing personal identification number each year in early January to prevent identity theft, even if they plan to file a paper return.82 Credit monitoring services are useless against tax identity theft.83 A tax identity thief does not ordinarily pursue other forms of identity theft, so a review of the credit reports for a tax identity theft victim is very prudent, but should not show any issues.
Although efiling certainly has advantages, it also has serious shortcomings, and in a very small accounting practice, it is a time-waster during tax season, when time is precious. Not everyone needs a refund in three weeks, and most of my clients don't get refunds. I filed my own paper 2012 corporate and individual returns in mid-January, before efiling software would have allowed it because not all the forms on my returns were being accepted under efiling prior to March 2, 2013. I keep good records, so I didn't wait for my brokerage Forms 1099, which arrived over a month later.
Efiling should be voluntary, not coerced or mandated. When efiling becomes a frictionless time-saver, I'll be a quick adopter. But as long as the above-cited serious problems persist with efiling, I'll prefer paper.
1b Criminal Investigation Division, Internal Revenue Service "Fiscal Year 2012 National Operations, Annual Business Report", May 9, 2013.
2 "Written Statement of Nina E. Olson, National Taxpayer Advocate," Hearing on Identity Theft and Income Tax Preparation Fraud before the U.S. House of Representatives Committee on the Judiciary, Subcommittee on Crime, Terrorism and Homeland Security, June 28, 2012, 5, citing IRS Identity Theft Advisory Council, Identity Theft Status Update 14 (June 19, 2012).
4 Laura Saunders, "TurboTax Triggers a Revolt," Wall Street Journal, January 17, 2015.
5 P.L. 105-206, §2001, enacting §6011(f) with an extensive note.
5a Treasury, "Identity Theft and Tax Fraud: Growing Problems for the Internal Revenue Service, Part IV", Testimony of The Honorable J. Russell George Treasury Inspector General for Tax Administration, 29 November 2012, pp. 3-4.
5b Chairman Todd Platts' Preview Statement, "Identity Theft and Tax Fraud: Growing Problems for the Internal Revenue Service, Part 4", 29 November 2012.
5c Treasury, "The Internal Revenue Service Was Not in Compliance With All Requirements of the Improper Payments Elimination and Recovery Act for Fiscal Year 2012," Treasury Inspector General for Tax Administration, Ref. No. 2013-40-024, 25 February 2013.
5d "Majority of CPAs polled had clients victimized by tax ID theft this year," Journal of Accountancy, 16 July 2105.
6 The IRS authorizes eight different efile providers, three of which are relevant to this discussion: electronic return originators (such as individuals using retail software and professional preparers) who submit returns to an intermediate service provider, who submits returns to a transmitter that has software and is authorized to interface with IRS. An efile provider can apply for any of these roles or combination of roles. Internal Revenue Manual §18.104.22.168.1.
8 Massachusetts' Romneycare compliance requires a 3-page Schedule HC plus additional continuation sheets and MA-1099-HC from employer or insurer to be attached to each paper individual income tax return.
9 Housing and Economic Recovery Act of 2008, P.L. 110-289, §3091; §6050W.
10 Emergency Economic Stabilization Act of 2008, P.L. 110-343, §403, adding §6045(g).
11 "Notification and Correction of E-filing Rejections" (Feb. 28, 2012).
12 Leahy-Smith America Invents Act, P.L. 112-29, §14.
13 This last step should become unnecessary once Modernized eFile replaces the Legacy eFile system and PDF pages can be attached to the efiling. Noncompliance with Form 8453 requirements is specifically listed as grounds for a "Level Three" infraction, which could result in a practitioner's suspension from IRS efile or other sanctions for two years. IRM §22.214.171.124.10.3.3.E.
16 One initiates a request for an IP PIN by filing Form 14039, "Identity Theft Affidavit," which merely requires an assertion of identity theft, not necessarily affecting taxes. William Hoffman, "Can IP PINs Prevent Repeat Taxpayer Identity Theft?" Tax Notes, June 18, 2012, p. 1451, Doc 2012-12516, 2012 TNT 113-3.
17 The IRS allows a 10-day late grace period to refile a rejected efiled return as a timely return on paper after the due date has passed. Notice 2010-13, 2010-4 IRB 327; IRS Publication 1345, IRS e-file for Authorized IRS e-file Providers of Individual Income Tax Returns, 32 (rev. Mar. 2009).
19 Employers needn't file Forms W-2 with the Social Security Administration until February 28 (March 31 if efiled), and a 30-day extension is available.
20a Eric Kroh, "IRS Sheds Light on Little-Known Fraud Prevention Unit," Tax Notes, May 3, 2013, Doc 2013-10756.
21 Harry Esteve, "Salem Woman Arrested in $2.1 Million Oregon Tax Fraud Case," OregonLive (June 6, 2012); Esteve, "'Human Error' to Blame in $2 Million Oregon Tax Refund Scam," OregonLive (June 7, 2012); Michelle Cole, "Oregon lawmakers demand to know: Why wasn't anybody fired for $2.1 million tax fraud?," OregonLive (August 29, 2012); "Oregon Department of Revenue disciplinary documents paint a disturbing picture," OregonLive (August 30, 2012); Esteve, "The inside story of Oregon's $2.1 million tax fraud case," OregonLive (September 29, 2012);
23 The Treasury Inspector General for Tax Administration reported that 2,176,657 fraudulent refund returns were identified in 2011. Treasury Department, "Interim Results of the 2012 Filing Season," TIGTA Ref. No. 2012-40-036, at 12 (Mar. 30, 2012). TIGTA reports 1.5 million additional undetected potential identity theft returns over and above the 2,176,657. See infra note 33.
24a James Kwak, "Software Runs the World: How Scared Should We Be That So Much of It Is So Bad?," The Atlantic (Online), Aug. 8, 2012.
25 Before 1998, the peel-off label mailed with IRS tax packages featured addressees' SSNs in plain view. Treasury has the authority under IRC §6109(d) to restrict use of social security numbers for government purposes only. See Jay Starkman, letter to IRS (January 20, 2010) commenting on Notice 2009-93.
26 The crook efiled the short Form 1040A to apply for a $1,500 refund, and IRS sent him $37,500 to include the $36,000 of estimated taxes in the account within the promised three weeks for efilers. It didn't raise any concern at IRS that the fraudster changed my client's North Atlanta address indicating that he now lived at a commercial storefront across from the Atlanta Hartsfield Airport runway. IRS finally corrected his account in August 2012.
27 "Most Taxpayers Whose Identities Have Been Stolen to Commit Refund Fraud Do Not Receive Quality Customer Service," TIGTA Ref. No. 2012-40-050, May 3, 2012; "The IRS and TAS continue to work together to address return processing issues impacting victims of identity theft," National Taxpayer Advocate, "2010 Annual Report to Congress," 523-526 (Dec. 31, 2010); "Identity Theft: Who's Got Your Number: Hearing Before the S. Comm. on Fin.," 110th Cong. (Apr. 10, 2008) (statement of Nina Olson, national taxpayer advocate).
28 NTA 2011 Report, supra note 22, vol. 1 at 48-73.
29 "Problems at the Internal Revenue Service: Closing the Tax Gap and Preventing Identity Theft: Hearing Before the Subcomm. on Gov't Org., Efficiency, & Fin. Mgmt., H. Comm. on Oversight & Gov't Reform" (Apr. 19, 2012) [hereinafter "Problems at the IRS Hearing"] (written testimony of Steven T. Miller, IRS deputy commissioner for services and enforcement).
31 The IRS identified more than 404,000 taxpayers affected by identity theft since 2008. "Identity Theft and Tax Fraud: Growing Problems for the Internal Revenue Service: Hearing Before the Subcomm. on Gov't Org., Efficiency, & Fin. Mgmt., H. Comm. on Oversight & Gov't Reform," 112th Cong. (Nov. 4, 2011) [hereinafter "Identity Theft and Tax Fraud Hearing"] (written testimony of Steven T. Miller, IRS deputy commissioner for services and enforcement), 3. By June 2012, it's grown to nearly 500,000, according to David Williams, director of the IRS Return Preparer Office. See infra note 47.
32 GAO, "Improper Payments," GAO-11-443R (Mar. 25, 2011). See updated report at 5c which notes at page 6, this decrease cannot necessarily be attributed to a reduction in the amount of EITC improper payments....IRS began using a new statistical methodology for computing the improper payment amount.
35 IRS Publication 1915, Understanding Your IRS Individual Taxpayer Identification Number (ITIN), 10 (rev. Jan. 2012).
36 In 2010 IRS issued $4.2 billion in tax credits to those individuals and has recovered none. Identity Theft and Tax Fraud Hearing, supra note 31, at 2.
38 "Individuals Who Are Not Authorizedto Work in the United States Were Paid $4.2 Billion in Refundable Credits," TIGTA, Ref. No. 2011-41-061, July 7, 2011; Treasury, "Reduction Targets and Strategies Have Not Been Established to Reduce the Billions of Dollars in Improper Earned Income Tax Credit Payments Each Year," TIGTA Ref. No. 2011-40-023 (Feb. 2011); "13 Investigates: IRS Loophole," WTHR-TV Channel 13 (NBC) Indianapolis; "Will Lawmakers Act to Close Tax Loophole for Illegal Immigrants?" WTHR-TV Channel 13(NBC) Indianapolis. IRS Publication 1915, Understanding Your IRS Individual Taxpayer Identification Number (ITIN), 10 (rev. Jan. 2012).
39 "IRS Strengthens ITIN Application Requirements; Interim Changes Will Protect the Integrity of the ITIN Process," IR-2012-62 (June 22, 2012); William Hoffman, "IRS Tightens Process for Issuing Individual TINs," Tax Notes, July 2, 2012, 42, Doc 2012-13459, 2012 TNT 122-5.
41 "Taxpayers Should be Able to Use Geithner/TurboTax Defense," TaxProf Blog (Apr. 16, 2012).
43 It's a secretive industry in which charities realize only a nominal amount per pound of clothes and goods, and many collection drives and drop-off boxes are scams. See Pietra Rivoli, The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power, and Politics of World Trade (2005).
44 See supra note 6 for types of aggregators. "Tax Administration: Many Taxpayers Rely on Tax Software and IRS Needs to Assess Associated Risks," GAO-09-297, at 12-14. The IRS has recently begun unspecified monitoring of adherence to security and privacy standards in the tax software industry. "Taxes and Identity Theft: Status of IRS Initiatives to Help Victimized Taxpayers," GAO-11-721T (June 2, 2011), at 5.
44a Jenny Jones, "Experts: SSNs Should Have Been Encrypted in South Carolina" State Tax Notes, November 13, 2012, Doc 2012-23158 , 2012 STT 219-32.
44c Diaz et al v Intuit Inc. et al, Case 5:15-cv-01778-PSG (filed 4/20/2015, USDC-NDCA)
44d Laura Saunders, "TurboTax Triggers a Revolt," Wall Street Journal, January 17, 2015.
44e "AICPA Recommends Clarification of Electronic Signature Rules," American Institute of CPAs, Tax Notes, September 24, 2014, Doc 2014-23390 , 2014 TNT 187-14.
45 Jay Starkman, "Are You Ready for EFTPS?" The Tax Adviser (Apr. 1997). Incorporate a target victim's business name in another state (optional). Enroll for IRS electronic tax payments at http://www.eftps.gov, listing the victim's bank account routing information (available from its check) with the taxpayer identification number of the fraudster. Neither IRS nor banks verify the false TIN against the true account holder's TIN (and generally don't verify the name either). The victim's funds can then be transferred via Automated Clearing House debit as a payroll tax deposit to the fraudster's TIN account on the day after the last day of the quarter. With a quickly efiled Form 941, "Employer's Quarterly Federal Tax Return," the Service will refund a payroll overpayment to the fraudster before the victim or IRS recognizes a problem. This can all be managed from abroad, and it might work with identity theft Forms 1040 now that individuals are able to make EFTPS estimated tax payments.
47 Press release, "Camp, Boustany Demand Report from Treasury Department" (June 25, 2012).
48 "Written Statement of Nina E. Olson, National Taxpayer Advocate," Hearing on Identity Theft and Income Tax Preparation Fraud before the U.S. House of Representatives Committee on the Judiciary, Subcommittee on Crime, Terrorism and Homeland Security, June 28, 2012, 9-12; "NTA 2011 Report," supra note 22, 420-426 (Most Serious Problem #22: The IRS Procedures for Replacing Stolen Direct Deposit Refunds Are Not Adequate).
50 "Illinois Attorney General Madigan Sues National Tax Preparer Mo' Money," Press Release, March 14, 2012. "Testimony from tax fraud victim Michael Robinson," Hearing on Identity Theft and Income Tax Preparation Fraud before the U.S. House of Representatives Committee on the Judiciary, Subcommittee on Crime, Terrorism and Homeland Security, June 28, 2012; "Is your tax preparer changing your return to collect a refund?" Baltimore Sun, July 15, 2012.
51 §6657, as amended by P.L. 111-198 (2010), §3(a). Previously, this penalty helped offset costs associated with bounced checks. Unlike bounced checks, there's no cost to Treasury associated with bad ACH debits, and taxpayers remain subject to late payment penalties. So a penalty on a refused ACH debit is a revenue grab.
52 Eric Kroh, "IRS Considering Ways to Prevent PTIN Theft, Misuse," Tax Notes, June 25, 2012, 1583.
53 Michael Cohn, "Sweep Nets Hundreds of NYC Tax Preparers Violating Laws," Accounting Today (Feb. 29, 2012).
56 United States-Korea Free Trade Agreement Implementation Act of 2011, P.L. 112-41, §501, amending §6695(g).
59 Section 6011(e)(3); reg. §301.6011-7; Rev. Proc. 2011-25, 2011-17 IRB 725; Notice 2011-27, 2011-17 IRB 723. Sens. Thomas Carper (D-DL) and Barbara Boxer (D-CA) have proposed S. 1289, §203 of which would lower the mandatory efiling threshold from 10 returns to five, change the "returns mailed" rule to "returns prepared," and impose a $50 penalty per paper return. See GAO, "Electronic Tax Return Filing: Improvements Can Be Made Before Mandate Becomes Fully Implemented," GAO-11-344 (Mar. 2011).
60 Circular 230, §10.51(a)(16).
62 Damon Darlin, "TurboTax Software Slows Just as the Big Deadline Nears," The New York Times, Apr. 23, 2007, at C8; Tom Herman and Vauhni Vera, "Intuit Users Hit Filing Snags," The Wall Street Journal, Apr. 19, 2007, at D2; IRS, "Taxpayers, Tax Professionals With TurboTax Problems Have Until Midnight April 19 to e-file," IR-2007-91 (Apr. 18, 2007).
63 Christopher Quinn, "Rescinded State Tax Refunds Back in Filers' Accounts," Atlanta Journal Constitution, Feb. 4, 2011.
64 Nicole Duarte, "IRS to Fix E-File Bug Blocking Some Seniors' Returns by Mid-February," Tax Notes, Feb. 7, 2011, 630.
65 John D. McKinnon, "Slow Refunds Rile Taxpayers," The Wall Street Journal, Mar. 9, 2012, at A2. Police were called to disperse 75 angry early filers demanding refunds. "Delay of tax-refund checks angers crowd at Instant Tax Service," Charlotte Observer (Jan. 28, 2012).
66 Included in the IRS "positives" was a low-income pro bono case recently brought to me. It concerned a 2010 return claiming a refundable adoption credit (paid for by relatives, but IRS didn't know that), when the taxpayers' gross income was less than the credit. Not only did IRS deny the refund, it sent a 30-day letter (which the taxpayer claimed was the initial notice) demanding repayment of the adoption credit refund IRS never sent them, it denied the EITC for that year, it asserted for good measure a two-year ban on the EITC under §32(k)(1)(B)(ii), and it imposed accuracy penalties. Adoption credit paid by relatives is probably refundable. See Lang, T.C. Memo. 2010-286 (gifts deductible as medical expense). Students are allowed to claim education credits on amounts paid by relatives.
68 William Hoffman, "IRS Will Double Expenditures in Battling Refund Fraud," Tax Notes, May 21, 2012, 956.
70 Crystal Tandon, "Too Many Unlisted Transactions Being Reported, IRS Officials Say," Tax Notes, Oct. 16, 2006, 203.
72b Government Accountability Office, "Tax Administration: 2007 Filing Season Continues Trend of Improvement, but Opportunities to Reduce Costs and Increase Tax Compliance Should be Evaluated," GAO-08-38, 10 (FN15), 14-15 (FN25), (Nov. 2007).
74 "Filing Season and FY 2012 Budget Request: Before Subcomm. on Oversight, H. Comm. on Ways & Means" (Mar. 31, 2011) (written testimony of IRS Commissioner Douglas Shulman).
77 "SOI Tax Stats Costs Incurred by Budget Activity IRS Data Book Table 28, Fiscal Years 2010 and 2011."
81 See supra note 16.
82 Go to www.irs.gov and type, "Electronic Filing PIN Request," in the search box.
83 Credit monitoring services have a dubious history. "LifeLock Will Pay $12 Million to Settle Charges by the FTC and 35 States That Identity Theft Prevention and Data Security Claims Were False," Federal Trade Commission, 9 March 2010; LifeLock Wikipedia. Better to use a credit freeze, as explained in Clark Howard's "Credit Freeze and Thaw Guide."
END OF FOOTNOTES
Bryan Gates, EA July 18, 2012 at 11:14 AM
Kudos to Jay Starkman for speaking truth to power!
To the Editor:
One cannot help but admire the zeal, passion, and scholarship in Mr. Starkman's article about the disadvantages of e-filing (Tax Notes, July 16, 2012, 283, Doc 2012-13570 , 2012 TNT 138-7 2012 TNT 138-7: Viewpoint). However, while the 82 footnotes in the article brought back fond memories of my previous life as a graduate student in Sociology, they did not alter my opinion of e-filing. Despite its kinks and problems, I think e-filing is fantastic and I share this opinion with all the practitioners I know. I also think that the IRS has done a great job with e-filing and is doing a better job each year. As to fraud, I think Mr. Charles Ponzi did quite well without ever e-filing his tax return. Unfortunately, I have to cut these comments short. I'm running low on candles and I have to go to the blacksmith to pick up my horse and get over to the next town for more candles while there is still daylight!
July 24, 2012
Lew Regenstein, August 1, 2012
I appreciate Jeff S' thoughful response to the article, and I hope that when he goes to get his horse, it is still there, and has not been taken by someone who stole his identity thru his efiling.
George, August 3, 2012 (commenting on TIGTA report in FN33)
What angers me most about this is that I have 2 clients whose refunds were stolen, and both reported it to CID, and CI did NOTHING about either case. One of the clients took it to the Postal Service Inspectors, who prosecuted the dude and he has been convicted.
Jay Starkman, CPA is a sole practitioner in Atlanta. This article was originally published in Tax Notes on July 16, 2012.