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Blog Posted in avatar   Walter "Bruno" Korschek's Blog

The Latest, Unique Way For The IRS To Waste Billions Of Dollars Every year

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By Walter "Bruno" Korschek
Posted Sep 1, 2012 in Politics
If you were to study wasteful federal government spending enough, you would eventually realize that the waste can be roughly classified into two broad categories: systemic/recurring waste and one time wasteful spending escapades. Systemic/recurring waste is the type of waste that occurs every minute of every day of every hour of every year that the Federal government operates. The magnitude of this type of waste is illustrated by the following follies:
- Nonpartisan sources reliably estimate that Medicare and Medicaid lose anywhere from $110 to $150 billion a year due to incompetence, inefficiencies, and outright criminal fraud.
- Social Security likely loses about $100 billion a year due to incompetence, inefficiencies, and outright criminal fraud.
- One Federal unemployment insurance benefits program loses about $19 billion a year to incompetence, inefficiencies, and outright criminal fraud.
Federal food stamp programs probably lose about $7 billion a year to incompetence, inefficiencies, and outright criminal fraud.
- The IRS has admitted that it fails to collect upwards of $380 billion a year from taxpayers who are legally required to pay that money in taxes.
Just in these few programs we see that the Federal government misuses and abuses over $600 billion every year of taxpayer wealth. But these examples do not include the one time wasteful spending abuses which have recently included the following instances:
- The U.S. Navy built two ships almost to completion at a cost of $300 million and then decided they were not needed. At that point, they spent another $10 million to turn the unused ships into scrap metal.
- The U.S. State Department spent $80 million to build a consulate in a northern Afghanistan city. Only after completion did they realize it would be a perfect target for a Taliban terrorist attack, requiring them to abandon the now completed construction.
- Employees of the General Services Administration threw themselves a lavish party in Las Vegas at a cost of over $800,000 of taxpayer wealth.
- The Huffington Post reported on May 5, 2012 that the TSA had purchased thousands of pieces of security equipment at a taxpayer cost estimated at about $184 million, equipment that was supposed to be installed at airport checkpoints to screen airline passengers. Unfortunately, that $184 million worth of equipment is collecting dust in government warehouses and will likely never be used, a finding that came to light at a recent joint Congressional panel hearing.
These are just a very, very small sample of the amount of waste that the Washington political class incurs every day and which we have covered extensively in the past.
And now we find out, not surprisingly, that the Treasury Department via the IRS has another way to waste billions of dollars. CNBC recently reported that thieves are fraudulently extracting billions of dollars from the IRS tax collection processes every year. The details of the fraud were laid out in the CNBC article by the IRS inspector general and include the following atrocities:
- In the report, the inspector general found that tax thieves are stealing the identities of taxpayers, then filing bogus returns on their behalf, and collecting fraudulent refunds as a result.
- The inspector general estimates that the IRS could issue as much as $21 billion in fraudulent tax refunds over the next five years.
- The scam is so blatant and bold that thieves are sending in false returns in bulk without even disguising the return mailing address on the returns. The report found one address in Lansing, Michigan that was the source of an unbelievable 2,137 tax returns, and to which the IRS directed more than $3.3 million in fraudulent tax refunds.
- In another instance, one residential address in Chicago was the location of 765 tax returns, worth more than $900,000 in fraudulent tax refunds.
The tax identify theft crime is most prevalent in Florida, with two cities, Tampa and Miami, topping the list of criminal activity. Tampa had 88,724 fraudulent returns filed, worth more than $468 million. Miami had 74,496 fraudulent returns worth more than $280 million in probably false returns.
In the year 2010, the inspector general's analysis identified about 1.5 million potential fraudulent tax returns worth more than $5.2 billion of lost taxpayer wealth.
- The inspector general concluded that this type of fraud is a “growing problem” involving criminal numbers that are increasing “exponentially.
Unbelievable. It seems it would be a simple computer programmer fix to flag a return that is, say the 500th return to the same address. It also seems that if the IRS knows that Miami and Tampa are hot beds of fraud, why not put together a task force and go to those two cities to crack down on the worst offenders. Once you have identified the root causes of a problem, like this able IRS inspector general has done, most intelligent people could come with some simple, common sense solutions to the identified problems and causes. However, simple and intelligent is usually beyond the means and abilities of the Washington political class.
So what is the Obama administration doing about this IRS tax identity fraud and the other fraud examples listed above? The Hill reported on April 9, 2012, as did other news sources, that the Obama administration was diverting about half a billion dollars of budget/taxpayer money to the IRS to help that organization track down and prosecute ordinary, law abiding Americans that do not purchase health care insurance under Obama Care.
So let me get this straight? Criminal elements defraud and rob the U.S. government and American taxpayer of hundreds of billions of dollars every year. The IRS mistakenly pays out billions of dollars every year to identity theft criminals, a problem that is large and growing "exponentially."
And Obama ignores this massive, ongoing waste of taxpayer wealth and focuses limited law enforcement and IRS resources on going after ordinary Americans? We have surely fallen down the looking glass into another reality when this is what passes for sound judgement and correct priority setting in Washington.

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