Misuse of tax ID numbers costs at least $380M, IG says

IRS isn't doing enough to prevent child tax exemptions being claimed more than once per child

The Internal Revenue Service isn't doing enough to stop wrong claims of about $380 million yearly when families claim tax benefits for the same child twice or more times, according to a new report today from the Treasury Inspector General for Tax Administration.

The loss stems from wrong and duplicative use of Taxpayer Identification Numbers, the numbers issued by the IRS to people who don't have a Social Security number.

A majority of these cases involves two or more relatives filing separate tax forms that claim an exemption for the same dependent child, the report states. Under law, the dependent child exemption is allowed only once per child per year on a single tax form.

In 2007, people got at least $380 million in personal tax exemptions and tax credits as a result of the multiple use of the taxpayer numbers, the report states. Over five years, that could total $1.9 billion, the IG concluded.

Although the IRS has taken several steps to identify fraudulent and duplicative uses of the taxpayer ID numbers, actions to date haven't been enough, the report indicated.

“Although the IRS has improved its processes to identify multiple [identification number] uses and prevent issuance of erroneous tax benefits, there are still significant limitations," the report states. "As such, multiple Taxpayer Identification Number use that results in erroneous exemptions and credits is still a substantial problem."

The IG made four recommendations. IRS officials agreed with two of them and disputed the other two:

  • The IRS should revise criteria to notify individuals identified by a database for filing of multiple taxpayer ID numbers. IRS officials disagreed, saying further analysis is needed.
  • The service should identify alternative compliance processes for individuals who claim the Earned Income Tax Credit with a multiple-use taxpayer ID number. IRS agreed with the recommendation.
  • The IRS should identify tax filers involved in multiple use of taxpayer ID numbers. IRS officials disputed the recommendation, saying they already have such processes in place.
  • The service should establish a process to recover tax benefits erroneously paid to taxpayers who use a multiple-use taxpayer ID number, and to prevent such use. IRS officials agreed.

About the Author

Alice Lipowicz is a staff writer covering government 2.0, homeland security and other IT policies for Federal Computer Week.

The 2014 Federal 100

Get to know the 100 women and men honored this year for going above and beyond in federal IT.

Reader comments

Wed, Nov 17, 2010 Fred United States

The time has come to repeal all these tax credits for individuals as well as coporations. When 39% of all tax filers pay no Federal Income Taxes, then there needs to be changes made. Everyone needs to pay some income taxes.

Wed, Nov 10, 2010 Hansel

Since the tax Payers ID number has been abused I say duduct the social security tax and make the payee jump thru hoops to get that social security deduction refunded to the payee. Oh the "red tape" the IRS could provide like lost TIN number or chads then put those fees in an interest paying escrow account set up just for the TIN users. the IRS would be rolling in interest payments and help the general fund.

Wed, Nov 10, 2010 RayW

Dave and hansel, the "Social Security" number (SSN) is an identity number that has been highly abused over the years. It was originally intended only to be used in the Ponzi scheme called Social Security (SS), but has since become a national identity number for many of us in the US. Since the SSN is still tied to the SS system and there are a lot of people who by nature of their relationship with the US taxpayer have to pay taxes on US income but are not eligible for SS, the Tax Payer Identity Number (TIN) is still used for them (as a side note, businesses fall under this category too).

I wonder how hard it is for those in another country who have to pay US income tax to get multiple TIN's and bypass the checks that way?

Tue, Nov 9, 2010 CyberSamuri

Not evey taxpayer is an Ameriban nor a resident of the U.S. and Social Security will not issue these people a SSN.

Tue, Nov 9, 2010 hansel

The IRS should stop this practice entirely and require that all applicants have a valid Social Security number for all applicants. I wonder how many duplicate payments are recovered and I am betting that the number is close to zero. Being a responsivle taxpayer for over 40 years and seeing this wide spread fraud accepted as the cost of doing business makes me why being honest is in my best interest with my dealings with the IRS. they probably will never catch me. sad...

Show All Comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above