The IRS Still Having Problems Authenticating ITIN Documents

If you’ve paid any attention at all to news about the IRS over the last several years, you’ve probably heard that the agency has had more than its share of difficulties with fraud and abuse. One issue that has been covered in some detail is the problem the IRS has had with people abusing the Individual Taxpayer Identification Number system. Recent news may be providing even more clues about why that system has been so riddled with fraud.

Just a few short years ago, the Inspector General charged with monitoring the tax agency responded to complaints from IRS personnel that claimed that they were being instructed to simply approve any ITIN applications that came in. After examining the evidence and the systems the IRS had in place to prevent fraud, the IG came to the conclusion that the taxpayers were losing billions of dollars due to abuse of the ITIN by illegal immigrants and others.

After another more recent audit, the IG’s office now thinks it understands at least part of the reason why the fraud detection systems at the IRS have been so porous. It turns out that the Agency lacks any real mechanisms for validating any of the documents they’re supposed to be relying on when approving these ID number requests. The IRS has no tools in place to verify these documents, and its personnel have no experience or requisite skills for doing it on their own.

As shocking as that might sound, it should come as no surprise. When the initial tax fraud by illegal immigrants was discovered a few years ago, one common complaint from the IRS personnel who were told to approve those foreign documents was that they had no one on staff who could actually read the languages used in the documents they were supposed to be verifying!

It’s all but incomprehensible to imagine that the agency charged with managing the country’s system of taxation would fail to realize that it cannot verify what it cannot understand. Even so, that appears to be the case. Whether through neglect or conscious design, the Internal Revenue System never made even the minimum effort required to give itself access to personnel with foreign language translation skills – and that failure has cost the U.S. taxpayers billions of dollars.

The Inspector General has issued recommendations to the agency to take steps to correct these mistakes. They include implementing processes that will enable them to compare foreign-issued documents with reference materials that can help them to better verify their authenticity, as well as training to assist employees in handling that verification process properly.

For its part, the IRS has deferred to the IG’s report, and claims that this is just another step in the agency’s ongoing internal review to better strengthen the ITIN program. The official line from the IRS now focuses on the fact that they stopped accepting notarized copies two years ago, and have required the original copies of all foreign-issued verification documents. Still, given the IG’s apparent skepticism of the agency’s competence in verifying such documents, is it not perhaps fair to wonder whether they would even know the difference between an “original” copy and a forgery?

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