House Subcommittee By Curtis Tatum, Esq.
Addresses $105.8 Billion
in Improper Payments
On July 9 the Subcommittee on Government Operations of the House Committee on Oversight and Government Reform held a hearing to address ways to reduce the amount of improper federal payments. According to testimony from Beryl H. Davis of the Government Accounting Office (GAO), the U.S. government paid out an estimated $105.8 billion in improper payments during the 2013 fiscal year. While the majority of these payments involved the Medicare and Medicaid programs, the figure also includes $14.5 billion in payments by the Internal Revenue Service related to the Earned Income Tax Credit and $6.4 billion in payments by the Department of Labor related to unemployment insurance claims. Several agency representatives testified at the hearing, including IRS Commissioner John Koskinen, who offered testimony concerning legislative proposals and steps that the IRS has already taken to address the problem of improper payments.
Earlier Deadline to File W-2s
A major focus of the hearing concerned the high rate of improper payments related to the Earned Income Tax Credit (EITC). The GAO estimated the error rate at 24% for the 2013 fiscal year. In his testimony, Koskinen addressed three reasons for the error rate. He noted that; (1) the rules are complex; (2) the IRS lacks third-party data; and (3) because the credit may result in a refund, it makes the EITC ripe for fraudulent claims. One solution Koskinen cited involves a provision in President Obama's proposed FY 2015 budget that would move up the deadline to file Forms W-2 from the current deadline of March 31 (if filed electronically) to January 31. The earlier deadline "would allow us to match these documents against income tax returns earlier in the process and allow us to more quickly spot errors and potential fraud," he said.
Fighting Identity Theft
Koskinen noted that "fighting refund fraud that is caused by identity theft is an ongoing battle for the IRS," and he outlined several steps that the IRS has undertaken to combat the problem, including use of truncated taxpayer identification numbers and a uniform policy on the expiration of ITINs. Koskinen indicated that Treasury and the IRS are "in the process of finalizing proposed regulations (REG-148873-09) allowing persons that are required to furnish tax-related documents to taxpayers to use a truncated taxpayer identification number (TTIN) on the taxpayer's copy of any tax-related document." (These regulations were subsequently released on July 15. See the August Payroll Currently for details.)
He also noted a recent policy change regarding ITINs, which will automatically expire "if not used on a federal tax return for five consecutive years." Koskinen explained that the policy is intended to "ensure that anyone who legitimately uses an ITIN for tax purposes can continue to do so, while at the same time resulting in the likely eventual expiration of millions of unused ITINs."
Koskinen identified additional items in President Obama's proposed budget that "would assist the IRS in its efforts to help prevent identity theft." One proposal would allow "IRS access to information in the national directory of new hires to cover general tax administration purposes which would include such things as data matching and verification of taxpayer claims during return processing," Koskinen said. Another proposal cited in Koskinen's testimony involves SSN masking. He notes that allowing employers to mask a part of an employee's SSN on Forms W-2 would provide "an additional tool that would make it more difficult for identity thieves to steal SSNs."
Koskinen described IRS budget cuts as the agency's "most serious challenge" and explained their effect on IRS operations. He indicated that, "the work we are already doing on reducing improper payments involves a difficult balance of resources and staffing at a time when our budget has been reduced significantly." Koskinen detailed the severity of the cuts, noting that the current budget is more than $850 million below the FY 2010 level and that the Service has lost almost 10,000 full-time permanent employees. Koskinen characterized the Obama Administration's proposed 2015 Budget as the beginning of a solution for the agency's funding issues. The proposed budget would increase IRS funding by approximately $1.35 billion. He concluded that, "our ongoing funding shortfall has major negative implications for taxpayers and the tax system in general and our efforts to reduce improper payments in particular."
Rep. Mark Meadows (R-NC) questioned Beth Cobert of the Office of Management and Budget concerning the progress the administration has made in reducing improper payments and briefly touched on unemployment insurance. Meadows noted that the UI program has had a significant decrease in improper payments of about $6 billion, though he insinuated that the decrease may not have been the result of efforts to reduce improper payments noting that, "some have suggested it is just because we have made it more inclusive in terms of being able to get those benefits."
Participate in National my Social Security Sign-Up WeekBy William Dunn, CPP
Social Security is excited to announce that August 17- 23, 2014 will mark the first National my Social Security Week! During this week, Social Security will host numerous events and activities across the country to raise awareness about the benefits of having a my Social Security account and to encourage the public to sign up for an account. The message for the campaign is "Prepare for your SOMEDAY: Join the millions and discover your benefits. Open a my Social Security account."
Why open a free my Social Security account?
Through a my Social Security account, individuals can access their Social Security Statement to check their earnings and get estimates of future retirement, disability, and survivor benefits they or their families may receive. If individuals already receive Social Security benefits, they can get benefit verification letters, change their address and phone number, and start or change their direct deposit information.