By David Barnes, TIGTA, 8 August 2012. [email protected]

WASHINGTON – Complaints from Internal Revenue Service (IRS) employees that their supervisors were urging them to ignore potential fraud in a program that reviews and verifies applications for Individual Taxpayer Identification Numbers (ITINs) have been validated in a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

The ITIN program was created in 1996 so that individuals who are not eligible to obtain Social Security Numbers could obtain an identification number for tax purposes. In 2011, the IRS processed more than 2.9 million ITIN tax returns resulting in tax refunds of $6.8 billion.

Following referrals from Members of Congress, TIGTA reviewed complaints from IRS employees regarding the management of the ITIN Program. The objective of TIGTA’s review was to assess the efficiency and effectiveness of the IRS’s process to identify questionable ITIN applications.

TIGTA substantiated many of the allegations set forth in the IRS employees’ complaints. Those complaints alleged that IRS management is not concerned with addressing questionable applications and is interested only in the volume of applications that can be processed, regardless of whether they are potentially fraudulent.  In particular, TIGTA found that IRS management:

  • Created an environment which discourages tax examiners from identifying questionable ITIN applications;
  • Eliminated successful processes used to identify questionable ITIN application fraud patterns and schemes; and
  • Established processes and procedures that are inadequate to verify each applicant's identity and foriegn status.
“TIGTA’s audit found that IRS management has not established adequate internal controls to detect and prevent the assignment of an ITIN to individuals submitting questionable applications,” said J. Russell George, Treasury Inspector General for Tax Administration.

“Even more troubling, TIGTA found an environment which discourages employees from detecting fraudulent applications,” he continued, adding, “To their credit, the IRS recently announced a series of improvements that will take effect immediately on an interim basis, in response to our findings.  It is to be hoped that significant, systematic change, rather than interim improvements, will take place.”

TIGTA made nine recommendations in its report. The IRS agreed with seven of the recommendations and has announced plans to implement interim changes based on TIGTA’s findings. IRS management is considering the other two recommendations while it conducts its own review.

Read the report by clicking here.



Note: The difference between the date TIGTA issues an audit report to the Internal Revenue Service and the date TIGTA publicly releases the report is due to TIGTA's internal review process to ensure that public release is in compliance with Federal confidentiality laws. 

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