Red flags within: IRS staff com­mit­ted tax credit fraud

The Washington Times Weekly - - Politics - BY STEPHEN DI­NAN

More than 100 em­ploy­ees of the In­ter­nal Rev­enue Ser­vice cheated the gov­ern­ment by fraud­u­lently claim­ing a first­time home­buyer tax credit in­cluded in the 2008 and 2009 eco­nomic stim­u­lus pack­ages, ac­cord­ing to fed­eral in­ves­ti­ga­tors.

The Trea­sury Depart­ment’s in­spec­tor gen­eral for tax ad­min­is­tra­tion, in sev­eral re­ports over the past few years, has iden­ti­fied a to­tal of 128 IRS em­ploy­ees who claimed the credit but who also made other claims that showed they ei­ther weren’t first-time buy­ers or bought their homes out­side the el­i­gi­bil­ity pe­riod for the credit, which was worth up to $8,000.

Mean­while, one other IRS em­ployee has been charged with us­ing her po­si­tion to try to help friends and rel­a­tives take ad­van­tage of the credit, which was signed by Pres­i­dent Bush and then boosted un­der Pres­i­dent Obama’s 2009 stim­u­lus law.

The IRS em­ploy­ees rep­re­sented a small part of the to­tal fraud in the pro­gram, which the in­spec­tor gen­eral said may have to­taled more than a half-bil­lion dol­lars over­all. The in­spec­tor gen­eral said re­fund­able tax cred­its, which trans­fer money back to tax­pay­ers even when their tax li­a­bil­ity is zero, “are tar­gets for fraud.”

Mem­bers of Congress who have over­sight over the IRS said it’s par­tic­u­larly egre­gious when the em­ploy­ees are caught cheat­ing.

“It is in­com­pre­hen­si­ble that this many IRS em­ploy­ees im­prop­erly claimed the home­buyer tax credit,” said Sen. Or­rin G. Hatch of Utah, the top Repub­li­can on the Se­nate Fi­nance Com­mit­tee. “These are the very peo­ple who are sup­posed to fairly en­force our tax laws, but seem to in­stead be tak­ing ad­van­tage of that ex­per­tise for their own per­sonal ben­e­fit.”

Asked for com­ment, the IRS re­quested that The Wash­ing­ton Times sub­mit ques­tions in writ­ing, which The Times did.

In­stead of an­swer­ing the ques­tions, spokesman Grant Wil­liam is­sued a gen­eral state­ment say­ing the agency takes com­pli­ance with tax laws “very se­ri­ously” and promised “strong ac­tion, in­clud­ing dis­missal” when it finds that an er­ro­neous claim has been made.

Mr. Wil­liams did not re­spond to fol­low-up re­quests.

At least one IRS em­ployee is fac­ing charges of mak­ing a false claim while acting as an of­fi­cer of the gov­ern­ment, a felony pun­ish­able by up to five years in prison, stem­ming from the tax credit.

Fed­eral pros­e­cu­tors in Bos­ton say Michael E. Doyle of New Hamp­shire, who worked for the IRS for about 20 years and who was a su­per­vi­sor in its An­dover, Mass., of­fice, claimed he had bought a home on April 15, 2008. In re­al­ity, he bought the home for $260,000 on Aug. 15, 2007, months be­fore the el­i­gi­bil­ity pe­riod.

Mr. Doyle’s at­tor­ney didn’t re­spond to a mes­sage seek­ing com­ment.

In an­other case, part-time IRS em­ployee Cather­ine Grif­fin in Ge­or­gia has been charged with al­ter­ing in­for­ma­tion in IRS com­put­ers to help four friends and fam­ily mem­bers ap­pear el­i­gi­ble for the credit. She charged them $2,000 each.

She pleaded guilty March 24 to one count of ac­cess­ing a com­puter with­out au­tho­riza­tion and is await­ing sen­tenc­ing.

A spokes­woman for the in­spec­tor gen­eral said they are not able to give out de­tails on ac­tive in­ves­ti­ga­tions and can’t talk about closed cases be­cause of tax­payer con­fi­den­tial­ity rules, so it’s not clear how many other IRS em­ploy­ees face legal jeop­ardy.

The in­spec­tor gen­eral’s warn­ing about re­fund­able tax cred­its is likely to find a re­cep­tive au­di­ence in Congress.

The House Ways and Means Com­mit­tee, which has over­sight re­spon­si­bil­ity for the IRS, is hold­ing a hear­ing Wed­nes­day on im­proper pay­ments made un­der re­fund­able tax cred­its.

A spokes­woman for the com­mit­tee said it was “outrageous that the abuse of re­fund­able cred­its has be­come so wide­spread that even em­ploy­ees of the IRS, the very agency that is sup­posed to be pro­tect­ing tax­payer dol­lars, have been im­prop­erly claim­ing the very cred­its they are paid to ad­min­is­ter.”

She said she ex­pects the IRS will have to an­swer tough ques­tions at the hear­ing.

A $7,500 home­buyer credit was cre­ated in 2008 as the hous­ing bub­ble popped and was de­signed to stim­u­late the real es- tate mar­ket. Mr. Obama’s 2009 stim­u­lus boosted the credit to $8,000, elim­i­nated a pay­back re­quire­ment and ex­tended the el­i­gi­bil­ity pe­riod.

The credit proved wildly pop­u­lar, and the gov­ern­ment is­sued $27 bil­lion in cred­its to 3.9 mil­lion tax­pay­ers in 2009 and 2010.

Early on, the IRS didn’t even re­quire those claim­ing the credit to sub­mit doc­u­ments prov­ing their el­i­gi­bil­ity be­fore they were granted the credit, and Congress didn’t give the agency the tools to track fraud.

Among the bo­gus claims the in­spec­tor gen­eral iden­ti­fied, to­tal­ing up to $513 mil­lion in un­war­ranted pay­outs, were:

13,448 tax­pay­ers who claimed the credit on a house they said they hadn’t bought, but promised to buy in the fu­ture.

Nearly 50,000 tax­pay­ers who ap­peared to have owned the home for up to three years, in vi­o­la­tion of the credit’s el­i­gi­bil­ity re­quire­ments.

More than 1,000 prisoners who re­ceived the credit de­spite be­ing in­car­cer­ated at the time.

Thou­sands of tax­pay­ers who claimed the credit for a home for which some­one else also claimed the credit.

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