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Mark Matthews Discusses How IRS's Efforts on Refund Fraud are Hurting Other IRS Investigations
Caplin & Drysdale

Mark Matthews Discusses How IRS's Efforts on Refund Fraud are Hurting Other IRS Investigations

Date: 3/28/2016

Tampa Tribune quoted Mark E. Matthews on how the recent success seen by IRS officials fighting tax refund fraud in Tampa may have hurt the agency's traditional efforts in fighting tax evasion. For the complete article, please visit Tampa Tribune's website.

Excerpt taken from the article.

But former IRS Deputy Commissioner Mark Matthews worries the focus may have shifted too far from the traditional role of IRS criminal investigators, who are highly trained in complex financial investigations.

While Matthews emphasized that he thinks refund fraud is important, he said the redirection of resources, coupled with severe IRS budget cuts, may prove harmful to overall tax collection efforts.

"I don't want to say I don't think these cases are important to work," Matthews said. "I can imagine the fury if you're a victim of this stuff… My general view is we're using the most highly trained financial investigators in the world to do cases that don't require those skills."

Matthews noted the IRS is a favorite punching bag in Washington, D.C., and has been a target of budget cuts that have hampered the agency's ability to carry out its mission of collecting the money that funds government. "You've got to find a way to fund democracy," he said.

He said the number of IRS employees has fallen from more than 100,000 to 80,000-plus, even as the agency's responsibilities have increased.

. . .

Matthews said the nation's tax collection system relies on voluntary compliance. An important way to ensure that people pay their taxes is to prosecute serious tax evaders, he said.

While prosecuting criminals who commit stolen identity refund fraud is important, Matthews said, it doesn't advance the overall mission of the IRS, which is nationwide tax enforcement.

Personally, I don't believe you can prosecute your way out of this problem," he said.

Identity thieves, he said, are harder to deter from cheating than regular taxpayers.

If Congress wants IRS criminal investigators to focus on identity theft, the agency should be given extra resources, he said. "It would be fine if we could increase the (Criminal Investigation Division) budget," he said.

Matthews noted the IRS audit rate is down this year, which could end up hurting the country in the long run if cheats are tempted because they think they can get away with avoiding their fair share of taxes.

"A fascinating number is in the small business community, they're reporting about 52 cents on the dollar on their income" to the IRS, while people who get W-2 forms don't have the opportunity to hide their income, and are "98.7 percent in compliance," Matthews said.

If the IRS doesn't get increased resources, Matthews said, the job of prosecuting stolen identity refund fraud should be given to another law enforcement agency. But ideally, he said, the civil side of the IRS would just tighten controls so it doesn't send out bogus refunds in the first place.

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