June 21, 2022
IRS report card
Last year the IRS was swamped by some 185 million attempted calls by taxpayers for tax information. This year there were only 39.5 million such calls to customer service lines, of which 2.7 million got through. These dispiriting figures are from a preliminary report of the Treasury Inspector General for Tax Administration (TIGTA).
On a more positive note, the Service identified 76,814 fraudulent tax returns in 2022, compared with just 2,325 in 2021. Some $808 million in false tax refund claims were blocked.
Leaker at large
In June 2021 internet publisher ProPublica released “The Secret IRS Files” based upon 15 years of tax returns of the top 0.001% of taxpayers. After reviewing data from an anonymous leaker, the report purported to show that wealthy Americans are undertaxed.
There was an immediate uproar over the violation of taxpayer confidential information, and a full investigation was promised. After nearly a year, we are no closer to understanding how the IRS data was compromised or stolen. Hackers might have been responsible, or perhaps an unscrupulous IRS employee did the deed. Treasury Secretary Janet Yellen, testifying before the Senate Committee on Banking, Housing and Urban Affairs in May, said the leak was “very damaging” and the department is doing “everything in our power to make sure there is not inappropriate access to such data.”
Failure to resolve questions concerning the data leak has led to political opposition to proposals to expand information reporting to the IRS, and has been cited as a reason to oppose the IRS’ hiring of more enforcement personnel.
Student loans and tax refunds
Between 1981 and 2002, Jeffrey Seto borrowed nearly $100,000 to fund his higher education. As of 2018, all the loans were in default, and interest and fees had ballooned his debt to more that $170,000. Mr. Seto began a repayment program, but soon fell behind.
In July 2019 Mr. Seto purchased a rooftop solar energy system for his home for $26,939. When he filed his 2019 income tax return, he claimed a credit for the solar installation of $7,994 and a total refund of $9,288. He was notified that the entire refund would be applied to his student loan debt.
Mr. Seto filed a lawsuit with the Federal Claims Court for recovery of his tax refund, acting as his own attorney. Unfortunately for him, that Court does not have jurisdiction to recalculate his loan obligations. What’s more, the Department of Education had warned him that failure to keep up with his loan payments could result in wage garnishment or offsetting the student loan against tax refunds.
