Fixing the IRS Fraud Filings
Today, I saw a program on CBS 60 Minutes about the IRS fraud scam that is perpetrated on people who had their identity stolen. The IRS has identified a simple scheme where anyone, with a social security number and a date of birth, can file online a false tax return and claim refunds in the amount of thousands of dollars. The IRS will send the refunds to a prepaid debit card within a week or so. The card is cashed and thrown away and no traces are left.
IRS Commissioner John Koskinen, was interview for the segment and the interviewer asked him why the IRS can't stop the scam by restricting the use of the debit card. They can insist on sending a bank check to the recipient. His response shocked me. He claims that some of the legitimate filers do not have a bank account and also would be charged a fee which cuts into their refund. Does this make any sense? Even if this is the case, there is a simple solution. I thought of it on the spot.
The simple solution is to pass a law requiring all banks to cash a Federal Treasury check with the fee either waived or reimbursed by the IRS. A simple ID would identify the recipient and he or she would not be required to be an account holder of the bank. That's it. The fee will easily be mitigated by the multi-millions of dollars of fraud saved as a result.
In my bank, I was told I could not deposit a Treasury check unless it is in my name. On one occasion, years ago, when my son first file his taxes but was away at school, his refund check came to the house. I tried to deposit it in my account and was told I couldn't. I had to mail the check to my son at his school so he could deposit it in his own account. At the time it seems overly restrictive to me but I followed the law thinking there must be a good reason. How naive of me.
The solution seems too easy. I'm waiting for the IRS to come up with some other excuses to continue the status quo. The simple fact is the money lost by fraud is not their money. It is our money, the taxpayers. If it came out of their own pockets, you can bet they will put a stop to this ASAP.
Some problems are our own making. There are simple solutions to many problems and yet they are not taken. The main reason is there is no incentive for any government employee to save. They prefer the status quo and maintaining a growing bureaucracy. Their power depends on it. The IRS is just one glaring example of this.
I read in the news recently that some of the IRS computers are still running Windows XP operating system. This is well over a year after Microsoft had announced the discontinuance of support and updates for XP. How is this possible? The IRS claims they lack the funding for the upgrades of their IT system. It is no wonder the IRS was hacked recently and lost 100,000 accounts data.
Any private company that are so irresponsible with their customer's data would be out of business. That does not apply to the IRS.
Some Related Information
- The Tax Refund Scam - CBS News
Con artists have been filing bogus tax returns and collecting millions. Steve Kroft finds out how far the scam has gone and why the IRS hasn't been able to stop it.
- Update: IRS misses XP deadline, will spend $30M to upgrade remaining PCs | Computerworld
The U.S. Internal Revenue Service acknowledged last week that it missed the April 8 cut-off for Windows XP support and will be paying Microsoft for an extra year of security patches.
- IRS hacked, 100,000 tax accounts breached
Criminals hacked into an Internal Revenue Service website and gained access to approximately 100,000 tax accounts, the agency said Tuesday. Another 100,000 attempts were made but were not successful.