IRS FREEZE "QUESTIONABLE" REFUNDS

Wednesday, January 11, 2006 - FreeMarketNews.com

A brand new front has been revealed on the income tax battleground: refunds being withheld, without notice, from taxpayers who are "suspected of fraud" in filing for them. According to an Associated Press article, citing Taxpayer Advocate Nina Olson, under this so-called "Questionable Refund Program" the Internal Revenue Service freezes "tens of thousands of tax refunds" it deems questionable each year, without telling the people who are awaiting their money.

Olson detailed the program in her annual list of the worst problems facing taxpayers, noting that, "It is a central tenet of American law that the government must notify an accused person of the offense it suspects he committed and must give the accused person an opportunity to present exculpatory evidence to show his innocence." However, she said, the IRS does not abide by this rule of law premise, choosing instead to assume guilt until innocence can be proven, and to be very lax about notifying the taxpayer of the problem.

The QRP, according to the agency, is aimed at stopping "billions in false refunds from being paid to criminals," but instead it apparently serves to delay refunds for thousands of valid claimants. Under the program's rules, a taxpayer isn't told anything until six months after trying to find out what happened to the refund. Refunds claimed on tax returns determined to be fraudulent may even remain frozen for an undisclosed number of years, until the IRS has seen the taxpayer file a number of returns they deem to be legitimate.

Meanwhile, a study of frozen refunds performed by Olson and her associates, according to the article, showed "no evidence of fraud in 66 percent of the cases," and taxpayers were given a full refund. Taxpayers got some or all of their claimed refund in 80 percent of the cases. Significantly, nearly 75 percent of the total pool studied were low-income families claiming the earned income tax credit, designed to reduce poverty among the working poor, putting the lie to the "tax criminals" charges. - ST

staff reports - Free-Market News Network

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