NCPA - National Center for Policy Analysis

Congress Blames TurboTax for Billion Dollar Tax Fraud

April 27, 2015

The federal government has never made fraud prevention a major focus. Instead, too often the incentive is to keep the voters happy by making sure the checks go out quickly — and worry about fraud later, maybe. Such a "pay and chase" approach was actually the official policy of Medicare until very recently, and even after the Affordable Care Act threw $77 million at the problem and instituted a glitzy new state-of-the-art anti-fraud center, Medicare fraud still climbed by $12 billion over 2010 levels.

It is not as if such fraud is particularly hard to detect. According to the Treasury Inspector General for Tax Administration (TIGTA), in 2011 alone 54,000 tax refunds totaling over $86 million were issued to 10 physical addresses. You read that right — 54,000 tax refunds to only 10 addresses. A single address in Atlanta received 24,000 tax refunds in 2011. Such fraud should have been identified about the time the third check was issued to the same address.

The tax fraud problem — estimated to be $5.8 billion last year alone — is likewise a result of too much complexity and inadequate incentives on the part of administrators. Responsibility falls squarely at the feet of the Internal Revenue Service (IRS) to enforce existing law but ultimately to Congress, as it is within Congress\'s power to reform, simplify programs, and restructure administrator incentives to identify and prosecute fraud.

That is why it is shameful to see Congress pass the buck and attempt to pin the blame for tax fraud on . . . tax preparation software. That is right—according to some in Congress, apparently TurboTax is to blame.

Source: Tom Giovanetti, "Blame the IRS and Congress, Not Software, For Tax Fraud," The Hill, March 12, 2015. 


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