The Internal Revenue Service is disputing a recent report that its agents have been told to ignore signs of fraudulent use of Individual Taxpayer Identification Numbers.

An Indianapolis TV station, WTHR, reported last week that six tax examiners who work for the IRS’s ITIN processing center in Austin, Texas, had come forward and claimed that for years, managers had instructed them to look the other way when they processed ITIN applications, even when they appeared to be fraudulent.

“We were being told by upper management to ignore fraud, to assign ITIN numbers and ... pay out refunds to people who are lying,” tax examiner Howard Antelis told the station. “It’s a license to steal when you allow that.” He said he had received a pile of ITIN applications for dozens of children attending the same school in South Carolina, but when he tried to find out more about the school he discovered it did not exist. When he informed his managers, they told him to approve the applications. WHTR said that five other tax examiners had corroborated his story.

Antelis said after his complaints went unanswered, he contacted the Inspector General’s office to report the problems. The Treasury Inspector General for Tax Administration sent examiners to the Austin office to investigate the allegations and is expected to release a report this summer.

Last month, the IRS announced that it is making changes in its ITIN program to strengthen its procedures for approving applications (see IRS Toughens ITIN Application Requirements).

“Last month’s announcement reflects another step in the IRS's far-reaching effort to protect the integrity of the tax system and combat non-compliance and fraud,” IRS spokesperson Christina A. D’Amico told Accounting Today. “The IRS has stopped a record amount of fraudulent and inaccurate claims in recent years through actions aimed at preventing misuse of social security numbers, fraudulent withholding claims and other related measures. Last month’s ITIN announcement is an expansion of this effort to focus on another key part of the tax system and ensure that appropriate controls are in place to prevent fraud. Last year, the IRS stopped more than $14 billion in fraudulent refunds from more than 2 million returns. That’s a dramatic increase from previous years, and a reflection of the IRS emphasis on this area.”

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