February 15, 1995
Johnson Announces Hearing on
Internal Revenue Service Budget Proposal for
Fiscal Year 1996 And 1995 Tax Return Filing Season
Congresswoman Nancy L. Johnson (R-CT), Chairman of the
Subcommittee on Oversight of the Committee on Ways and Means, today
announced that the Subcommittee will conduct a hearing on the
Internal Revenue Services' budget proposal for fiscal year 1996 and
the 1995 tax return filing season. The hearing will be held on
Monday, February 27, 1995, in room B-318 Rayburn House Office
Building, beginning at 10:00 a.m.
This hearing will feature invited witnesses only. In view of
the limited time available to hear witnesses, the Subcommittee will
not be able to accommodate requests to testify other than from those
who are invited. Those persons and organizations not scheduled for
an oral appearance are welcome to submit written statements for the
record of the hearing.
The fiscal year 1996 budget request for the Internal Revenue
Service totals $8.2 billion and will support the activities of
almost 115,000 employees. These resources will support the IRS's
operations in collecting nearly $1.3 trillion in revenue and in
administering the federal tax laws. The $8.2 billion budget request
includes $830 million to process the tax returns which taxpayers
will file in 1996: 51.6 billion to examine tax returns; $909 million
for collection activities; and $1.9 billion for information systems.
The 1995 tax return filing season refers to the period of time
between January and April 15th when American taxpayers are expected
to file 116 million tax returns. Approximately 82 million taxpayers
are expected to receive an average refund of over $1,100 in 1995.
The Subcommittee on Oversight held two hearings last year on
the subject of income tax refund fraud. The Subcommittee learned
that criminals were exploiting the tax system to receive fraudulent
refund payments from the IRS. Two factors appear to have fueled a
rapid expansion of refund fraud schemes. First, the refundable
nature of some tax credits, such as the earned income tax credit
(EITC), make them particularly susceptible to refund fraud. The U.S.
General Accounting Office has said that the EITC is a factor in over
90 percent of fraudulent refund claims. Second, the advent of the
electronic filing of tax returns has led some tax return preparers
and banks to provide what are generally called "refund anticipation
loans" (RALs) to taxpayers who file electronically. With RALs, banks
lend money to a taxpayer based on his or her anticipated tax refund
and not on the credit worthiness of the person as a borrower.
Criminals sometimes can exploit the rapid turn-around time of a RAL
to receive a refund before the IRS can complete its cross-checks and
identify a fraudulent refund claim. At an October 6, 1994,
Subcommittee hearing, Ronald K. Noble, the Under Secretary for
Enforcement at the Department of the Treasury, testified that the
refund fraud problem could be as high as $5 billion.
The Administration has taken several steps to curb income tax
refund fraud during the 1995 filing season.
WAYS AND MEANS COMMITTEE:
In October 1994, the IRS announced that it would suspend the
issuance of direct deposit indicators (DDIs) to tax return preparers
who file returns electronically. The DDI informs the tax return
preparer that the taxpayer's refund is not subject to offset for
delinquent government loans or child support. In the past, the
receipt of a clean DDI often was a pre-condition for a bank to issue
a refund anticipation loan.
The IRS also has increased its scrutiny of EITC claims. In
particular, it is performing extensive cross-checks of all names and
social security numbers to determine whether or not they match. A
taxpayer's failure to supply accurate social security numbers could
result in a delay of the person's tax refund.
The IRS fiscal year 1996 budget request represents an increase
of 888 employees and $726 million over the comparable levels in
fiscal year 1995. The Subcommittee will review how these resources
will be applied to carry out the mission of the IRS. In particular.
it will review the status of the Tax System Modernization (TSM)
program which is earmarked to receive over $1 billion in fiscal year
1996. TSM is the program to upgrade the computer and information
handling capability of the IRS.
The Subcommittee also will review the status of the 1995 tax
return filing season. Special attention will be paid to the steps
which the IRS is taking to curb refund fraud. It will review the
consequences of the decision to suspend the issuance of DDIs and the
closer scrutiny of EITC claims. It also will examine ways to reform
the EITC to reduce fraud.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Any person or organization wishing to submit a written
statement for the printed record of the hearing should submit at
least six (6) copies of their statement by the close of business.
Monday, March 13. 1995. to Phillip D. Moseley. Chief of Staff,
Committee on Ways and Means, U.S. House of Representatives. 1102
Longworth House Office Building, Washington. D.C. 20515. If those
filing written statements wish to have their statements distributed
to the press and interested public at the hearing, they may deliver
200 additional copies for this purpose to the Subcommittee on
Oversight office, room 1136 Longworth House Office Building, at
least one hour before the hearing begins.
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