I.R.S. is on the Case

A NYT article, I.R.S. Move Said to Hurt the Poor, details the efforts of the IRS to reduce fraud by blocking questionable refunds. Of course, the refunds were all due to the poor. This makes perfect sense, since we all know that the rich don't cheat. The article notes:

Tax refunds sought by 1.6 million poor Americans over the last five years were frozen and their returns labeled fraudulent, although the vast majority appear to have done nothing wrong, the Internal Revenue Service's taxpayer advocate told Congress yesterday.

A computer program identified the refund requests as suspect and automatically flagged the taxpayers for extra scrutiny for years to come, the advocate said in her annual report to Congress. These taxpayers were not told that the I.R.S. criminal investigation division suspected fraud.

The advocate, Nina Olson, said the I.R.S. devoted vastly more resources to pursuing questionable refunds sought by the poor - which under the highest estimate is $9 billion - than to the $100 billion in taxes not paid each year by people who work for cash and either fail to file tax returns or understate their income.

As for the suspected fraud in refund requests, Ms. Olson said her staff sampled the suspect returns and found that 66 percent were entitled to the amount sought or more. Another 14 percent were due a partial refund. She expressed doubt that many among the remaining 20 percent had committed fraud.

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Ms. Olson said the criminal investigators' efforts, known within the I.R.S. as the Questionable Refund Program, were unfair and might be illegal.

"At a minimum, this procedure constitutes an extraordinary violation of fundamental taxpayer rights and fairness," Ms. Olson wrote, adding that it "may also constitute a violation of due process of law."