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ID Errors Trip Up IRS, Watchdog Agency Says

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The Associated Press

Published: September 12, 2007

WASHINGTON - The Internal Revenue Service may be losing hundreds of millions of dollars because it won't spend the time and money to match millions of income statements with incorrect or missing identification numbers to existing tax accounts, an IRS watchdog said Tuesday.

The Treasury Inspector General for Tax Administration said that in 2004, the IRS received about 3.8 million miscellaneous income statements reporting about $150 billion in earnings that could not be computer-matched to a filed tax return because of missing or erroneous ID numbers.

The inspector general's office, which does oversight of the tax agency, looked at a sampling of the mismatched IDs and calculated that about 6,000 of the individuals had not filed 2004 tax returns despite having income statements indicating they earned more than $100,000. That translates into about $630 million in income, it said.

Much of the income involved compensation for workers such as independent contractors reported on unusable miscellaneous income statements.

The office said that it looked at 620 income and wage statements with mismatched names and ID numbers reporting more than $60,000 in earnings. Using IRS automated data systems, it was able to manually match half of those to taxpayer accounts in IRS records.

It urged that Congress pass legislation, backed by the administration, that would require employers to verify the accuracy of ID numbers for the employees they hire. The office also recommended that the IRS do more to investigate high-dollar miscellaneous income and wage statements with mismatched names and IDs.

The IRS, in response, said it supports the legislation but has concluded that the cost of manually tracking down mismatched names and IDs might exceed that of the benefits.

'The IRS's opposition to this recommendation is confounding,' said Inspector General J. Russell George, adding his office's audit showed that increased examination of statements would more than pay for itself in increased revenue.

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