Washington D.C.
304 Russell Bldg.
Third Floor
Washington D.C. 20510
(202) 224-2742
Boston
One Bowdoin Square
Tenth Floor
Boston, MA 02114
(617) 565-8519
Springfield
Springfield Federal Building
1550 Main Street
Suite 304
Springfield, MA 01101
(413) 785-4610
Fall River
222 Milliken Place
Suite 312
Fall River, Ma 02721
(508) 677-0522 |
|
| |
|
01/19/2006
Kerry, Obama Fight to Protect EITC, Tax Refunds For American Families
WASHINGTON, DC – Today, Senator John Kerry (D-Mass.) and Senator Barack Obama (D-Ill.) sent a letter to IRS Commissioner Everson asking that the Criminal Investigation Questionable Refund Program be temporarily suspended until questions are answered about the program and an assessment of the value of the program can be made. Earlier this month, the National Taxpayer Advocate Report to Congress hi
|
January 19, 2006 The Honorable Mark W. Everson Commissioner Internal Revenue Service 1111 Constitution Avenue, NW Washington, DC 20224 Dear Commissioner Everson: On January 6, 2006, National Taxpayer Advocate Nina E. Olson released the National Taxpayer Advocate Report to Congress. The report highlights 21 of the problems encountered by taxpayers. We are specifically concerned with the second problem, Criminal Investigation Refund Freezes, and its impact on the earned income tax credit (EITC). Under this program, the IRS is freezing the refunds of primarily low-income taxpayers without giving the taxpayers notice or any opportunity to be heard. We support vigorous efforts to prevent tax fraud and abuse and to promote compliance with tax law. We are concerned that this program may not effectively promote compliance or reduce fraud, while potentially abrogating taxpayer rights. It is essential, that all IRS efforts to maintain tax compliance respect the basic tenets of our legal system ? including due process. The Advocate’s report describes how the IRS Criminal Investigation (CI), through its Questionable Refund Program (QRP), places a “freeze” on hundreds of thousands of refund claims each year. When fraud is suspected, any refund is immediately withheld. Unfortunately, taxpayers are not permitted an opportunity to make arguments supporting their claims or to provide the appropriate documentation. This is particularly serious since many of these taxpayers are poor. In 2005, the Taxpayer Advocate Service (TAS) received more than 28,000 requests for assistance from taxpayers who had their refunds frozen. TAS studied a randomly selected sample of cases and looked at the ultimate disposition. The results showed that in 80 percent of these cases, the taxpayer was eligible for a full or partial refund, and in 66 percent of these cases there was no evidence of fraud. The median adjusted gross income of these taxpayers was $13,330, and the median refund was $3,519. It is extremely disturbing that taxpayers who have done nothing wrong have had their refunds delayed without their knowledge. According to the report, most taxpayers who were ultimately eligible for a refund did not receive the refund for over eight months. Experiencing a lengthy delay in receiving a refund – in this program, typically 26 percent of a taxpayer’s annual income, using the numbers cited above ? is especially detrimental to low-income taxpayers. In more than 74 percent of the cases studied by TAS, taxpayers claimed the EITC. We are strong supporters of the EITC and believe it is a successful program that lifts more children out of poverty than any other government program. Certainly, there has been some noncompliance with the EITC, but most of this is due to error and not fraud. Steps have been taken to reduce the error rate, and the IRS should continue making improvements. These improvements should be carried out in the context of EITC compliance and outreach initiatives of which Congress has received regular reports, and the customary audit processes that protect taxpayers’ basic rights. However, we believe that the EITC should be strengthened, and the IRS should not take any actions that weaken its benefits. Taxpayers who benefit from the EITC should not be singled out to have their refunds frozen. We are concerned that the revenue protection benefits of the program do not outweigh the hardship that taxpayers may incur. In the TAS sample, the IRS froze $1,552,574, and ultimately paid out $2,457,309, including over $81,000 in interest. In order for us to evaluate the administration of this program and its effectiveness in reducing fraud and increasing compliance, we request the following information: 1. Explain the role of the CI, the reason for its creation, and the goal of the QRP. 2. Explain why CI has been involved in EITC cases and why the IRS Examination function does not make the determination of the validity of the claim for the EITC. 3. Explain the rationale for targeting of EITC taxpayers by this program, given that EITC taxpayers already are over targeted for audit (constituting 48 percent of the individual tax returns audited in FY2004 though EITC returns were only 17 percent of the total filed), despite representing a very small portion of the tax gap. 4. In addition to the EITC, a list of other specific programs or deductions that have resulted in refunds being frozen. 5. For the last three fiscal years, a breakdown by income of the taxpayers that have had their refunds frozen. For each category, provide the number and percentage of taxpayers that ultimately received the full refund and the number and percentage of taxpayers that received a partial refund. We request that you provide this information by February 1, 2006. In addition, we recommend that the IRS temporarily suspend the QRP until the above questions are answered and an assessment of the value of the program can be made. Thank you. Sincerely, John Kerry Barack Obama # # #
|
|
|
