Intelligencer Journal/Lancaster New Era

Tax refunds may be slowed by IRS push against fraud
BY RICHARD RUBIN, Bloomberg News

WASHINGTON -- Some taxpayers seeking a quick refund may have to wait longer than usual this year as the Internal Revenue Service tries to stop criminals who steal others' identities and file fraudulent returns.

The agency, which just began accepting 2012 returns, is making its automated system more sensitive to signs of potential fraud, meaning some returns will get a closer look. Last year, the IRS prevented $20 billion in fraudulent refunds from being issued, up from $14 billion the previous year.

The tax agency's efforts to combat identity theft reflect the tension in the IRS's multiple missions, said Benson Goldstein, a senior technical manager at the American Institute of Certified Public Accountants in Washington.

The IRS has been trying to shorten processing times to accelerate refunds, in part to encourage electronic filing and in part to reduce taxpayers' reliance on short-term loans. The speed of refunds presented an opportunity for fraud.

"It's a difficult responsibility for the IRS," said Goldstein, who said some legitimate taxpayers may have their refunds delayed. "They're there to get the prompt refunds but at the same time to protect the U.S. Treasury."

The IRS expects to meet its goal of delivering 90 percent of refunds within 21 days, Michelle Eldridge, a spokeswoman for the agency, said in an interview. That compares with months of waiting for taxpayers who are victims of identity theft.

The agency is trying to be careful and "underpromise and overdeliver," said John Hewitt, founder and chief executive officer of Liberty Tax Service in Virginia Beach, Va.

The IRS has long delayed refunds to prevent fraud, Hewitt said. This year's efforts, combined with an expected flood of returns because of late congressional action that delayed the start of filing, may slow refunds by about a week, he said.

For fiscal 2012, the IRS's identity-theft unit received about 450,000 cases, up 78 percent over the previous year, according to the National Taxpayer Advocate, an independent organization within the agency.

Using Social Security numbers illegally obtained from sources such as doctors' offices and payroll departments, criminals generate fake wage reports and false tax returns.

"It's a difficult responsibility for the IRS. They're there to get the prompt refunds but at the same time to protect the U.S. Treasury."

Benson Goldstein

CPA group manager