GAO: IRS coughed up $5 billion in fraudulent returns

The IRS handed out $5.2 billion worth of tax refunds to fraudsters for the 2013 filing season, according to a new government audit.

{mosads}The Government Accountability Office found that the IRS policy of approving refunds as quickly as it can – instead of double-checking returns for fraud – was to blame.

IRS officials say that they stopped $24.2 billion in fraudulent returns, or roughly four out of every five dollars in attempted fraud, from going out the door.

But the findings still worried top lawmakers, who want the IRS to improve its efforts on what Congress and the agency alike believe is a big problem.

“The IRS is not doing enough to protect Americans from the terrible crime of identity theft and fraud,” House Ways and Means Chairman Dave Camp (R-Mich.) said Monday.

Camp, Senate Finance Chairman Ron Wyden (D-Ore.) and Sens. Orrin Hatch (R-Utah), Bill Nelson (D-Fla.) and Susan Collins (R-Maine) requested the GAO study.

Part of the problem, GAO found, is that the IRS isn’t able to start matching tax returns with what employers report on W-2 forms until July – after refunds are delivered.

The Treasury Department has proposed only giving businesses until Jan. 31 to submit W-2s. But Congress would need to approve such a switch, and the IRS has yet to study the impacts of that sort of move.

Treasury also wants to slash the number of W-2’s an employer is submitting before they have to file electronically, from 250 to five or 10.

Either way, GAO says there’s “no ‘silver bullet’ available” to solve the problem, though it also urged the IRS to be vigilant in developing new strategies.

Lawmakers agreed: “This GAO report is an important step forward as it makes a number of important recommendations for verifying that taxpayers are getting the refunds they deserve and that the fraudsters don’t get them instead,” Wyden said.