The IRS has frozen refunds for hundreds of thousands of low-income taxpayers without telling them they’re being investigated for tax fraud or giving them a chance to defend themselves, the IRS taxpayer advocate said Tuesday.
In a blistering report to Congress, Taxpayer Advocate Nina Olson said complaints about unpaid tax refunds have soared more than 400% since 2002. Sixty-six percent of those who complained were entitled to a full refund, an investigation by her office found. An additional 14% were determined to be eligible for a partial refund, Olson says.
The issue raises “serious questions” about the protection of taxpayer rights and might constitute a violation of due process of law, Olson charged in her report.
More than three-quarters of the returns investigated were for low-income families who claimed the earned income tax credit, a program that provides tax refunds for the working poor. Delayed refunds cause a “significant hardship” for these taxpayers, the report said.
The taxpayer advocate’s office estimates up to 1.6 million refunds have been frozen over the past five years. Once a taxpayer’s refund is frozen, the IRS will automatically freeze future refund claims until the taxpayer files an undisclosed number of “legitimate” returns, the taxpayer advocate report says.
The IRS doesn’t notify taxpayers that their returns are being investigated for fraud. And even if taxpayers inquire about their refunds, IRS employees are usually barred from providing any information until six months after the taxpayer’s inquiry, Olson says.
They won’t tell you they are investigating you, they won’t give you your money back, they won’t let you defend yourself, they won’t respond for 6 months when you do try to defend yourself, and they freeze all future refunds until they decide you deserve to get them back.
The mafia has more shame than your government.
*** Update ***