- The Washington Times - Wednesday, October 23, 2013

ANALYSIS/OPINION:

Who is minding the IRS?

That is the first and most logical question to ask after a front-page story in The Washington Times on Wednesday revealed that the Internal Revenue Service wasted more than $13 billion on bogus claims for the Earned Income Tax Credit over the past decade.

While the egregious waste of taxpayer money is hardly new, part of the problem stems from mixed signals from President Obama, who in 2009 issued an executive order to get more folks signed up for the tax credit and, at the same time, crack down on bogus payments.

The IRS has seemingly carried out that first mission but failed to deliver on the second.

In short, they put the cart carrying the honest working man’s (and woman’s) cart before the horse.

First established in 1975, the credit is intended to help individuals and families, including the hardworking poor, keep more money in their own hands.

Since then, it has undergone several changes, including during the Reagan years. After Mr. Obama entered the White House in 2009, he expanded the tax credit by raising income levels for families of three or more children and by raising the income threshold for married couples.

What a relief.

But that also is where the conundrum rests.

On the one hand, Congress and presidents have agreed the tax breaks are a good thing, whether the taxpayer receiving the tax credit is a single dad raising a single child, or a husband and wife struggling to raise a blessed brood. The dollars and sense of the credit for both family situations are laudable.

The conundrum springs from Mr. Obama’s mixed messages in his 2009 executive order amid the recession, states’ attempts to sign up more of their taxpayers for the credit, and the IRS left to its own devices to stem the flow of wasted tax dollars.

Dozens of states (most of them blue) and the District of Columbia have enacted state credits. In the District, city officials enlist the aid of volunteers, who then are trained in tax law and tax preparation. Virginia’s program is similar.

The problem is that the IRS, recognizing part of its own flawed attempts to rein in billions upon billions of waste, began upping the fines on professional, paid tax preparers who turned a blind eye on or sent fraudulent claims for taxpayers seeking the credit. The law, which upped the ante from $100 per erroneous claim to $500, took effect in January 2012.

Still, there are no guarantees ill-suited volunteers who prepare erroneous claims will be penalized by the IRS or caught before a tax form is filed with the IRS or a state.

Story Continues →