Wednesday, January 11, 2006

Has an IRS Anti-Fraud Program Run Amok?

IRS Taxpayer Advocate Nina Olson has sharply criticized the Questionable Refund Project (QRP) as failing to protect taxpayers' rights as well as for taking too long to reach resolutions and being overly weighted toward low-income taxpayers. The QRP was designed by the Criminal Investigation branch of the IRS to reduce tax fraud through what appears to be a mathematical model. The biggest problem with the QRP is that it appears that taxpayer refunds are frozen without notice to the taxpayer. Olson believes that about 120,000 refunds were frozen in 2005 and perhaps as many as 2 million over the last five years. Elizabeth Atkinson of the Community Tax Law Project asserts that the program seems to target low-income taxpayers.

While fighting tax fraud is a legitimate goal of the IRS and it is possible that the QRP is an appropriate model, the Internal Revenue Service must investigate and in likelihood reform the program. At minimum, taxpayers deserve notice that their refund is being held up and a form of due process to quickly address situations where the model falsely or overvigorously withholds the refund. The possibility of low-income taxpayers being targeted, though less clear-cut, is also troubling; on top of the problems with aiding Hurricane Katrina victims late last summer, another indication that the government is not helping those with limited resources is not good for the social fabric of the country.


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