When whistleblowers file a complaint with the IRS that someone is stealing from the treasury, their report is supposed to be sent to a detective for prosecution. Instead, many are sent somewhere unexpected: a paper shredder.
In a stinging audit released Wednesday, the Treasury Inspector General revealed how more than 12,000 tax fraud reports were destroyed in 2011, at the very same time the IRS faced intense scrutiny for ignoring widespread theft.
Auditors said the IRS received 116,307 fraud reports in 2011 and destroyed 12,401 of them. Often, the reports were destroyed solely because they were written on the wrong form – no matter how viable the case was.
The IRS has three different forms to report tax fraud and ID theft. When a taxpayer files the incorrect one, clerks are trained to destroy it instead of forwarding it for action, the audit found. Auditors said clerks have no choice because there is a "lack of procedures" for dealing with fraud reports that are entered on the mistaken form.
The audit estimated at least 3,000 identity theft claims were destroyed. ID theft has been especially rampant in the Tampa Bay Area, where con artists have repeatedly filed false tax returns using real people's Social Security numbers. It is estimated tax cheats are draining the U.S. Treasury by billions of dollars.
Auditors said taxpayers aren't notified when their form is shredded.
The audit concluded that the process for filing tax violations is "confusing and inconsistent."
Complicating matters is how the forms are handled. Auditors said employees in 27 different clerical units handle incoming forms, and that "IRS management could not immediately identify all employees" who deal with them.
Here are links to the correct forms:
TAX FRAUD FORM: http://www.irs.gov/pub/irs-pdf/f3949a.pdf
ID THEFT FORM: http://www.irs.gov/pub/irs-pdf/f14039.pdf
TAX PREPARER FRAUD: http://www.irs.gov/pub/irs-pdf/f14157.pdf
Auditors also scolded the IRS for handling fraud reports as ordinary correspondence, which they said "delayed" appropriate action.
To correct the problems outline in the report, auditors recommended the IRS revise its main fraud form, improve internal procedures, and begin taking fraud reports online.
The IRS agreed with many of the auditors' recommendations. In its response to the report, the IRS said it would "review current procedures and evaluate steps to ensure a more effective quality review process and tracking system."
FOX 13 / WTVT-TV
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