WASHINGTON, D.C. – House Ways and Means Oversight Subcommittee Chairman Vern Buchanan (R-FL) today delivered the following opening statement at a Subcommittee hearing on the 2017 Tax Filing Season.
Remarks as prepared for delivery:
“Every year this Subcommittee holds a hearing on the tax filing season. The annual hearing is an opportunity to hear about the progress and challenges IRS has administering the tax code – and to learn what Congress may be able to do to help.
“In our country, we have a voluntary tax system. A key element of voluntary compliance is taxpayers being treated fairly. If taxpayers perceive that others are cheating the system and getting away with it, compliance will decrease.
“Just last week, in south Florida, it was announced that three people were indicted for stealing personally identifying information. They filed over 2,000 fraudulent tax returns and claimed more than $6.8 million dollars. Thankfully, these fraudsters were caught.The good news is that they are facing serious prison sentences and financial penalties. The bad news is that their fraudulent activities existed for roughly 7 years before finally being stopped. We have to do better.
“One tax credit that has been particularly prone to fraudulent activities is the Earned Income Tax Credit—often referred to as the EITC. Unfortunately, the IRS estimates that approximately 24 percent of all EITC payments are improper. We are talking about big money here—roughly $16.8 billion dollars was paid out improperly in the 2016 tax year. However, it is unclear how much of that 16 billion is FRAUD, and how much is calculation or paperwork error. Income misreporting is a major cause of improper EITC payments. Although the IRS has implemented some corrective actions to prevent erroneous payments and has had some success, we have to do better. Stopping $3.6 billion dollars is good. But, allowing more than four times that amount to go out the door is not acceptable. The taxpayers deserve better.
“False reporting of wages and withholding make up more than $1.3 billion in potentially undetected fraudulent tax returns. Providing the IRS with wage information faster should allow the agency to verify that the W-2 matches the information filed by the taxpayer. Until this year, the IRS only received a small amount of wage data prior to refunds being sent to taxpayers. The majority of the matching was done in the summer—after the filing season was over. This forced IRS to pay refunds and THEN determine whether they were properly being paid. In December of 2015, in the PATH Act, Congress changed the reporting deadlines for employers to submit W-2 information to the Social Security Administration, which is then sent to IRS. Congress also required that refunds claiming certain refundable tax credits, like EITC, would be held until February 15. The goal of these two provisions is to allow for wage verification before a refund is issued, and to reduce the “pay and chase” method of fraud detection. The 2017 tax filing season is the first time the IRS will be implementing these provisions. Although it is still a bit early to make conclusive determinations, I am eager to receive an update from our witnesses on the outcome of these changes.
“I want to thank the witnesses for being here today and I look forward to your testimony.”