Audit: IRS loses billions due to stolen ID numbers

Tax cheats armed with stolen identification numbers are costing the Treasury billions of dollars a year, according to a new audit.

Treasury’s inspector general for tax administration says that, in 2011 alone, tax cheats were able to steal or falsely obtain some 285,000 employee identification numbers, which the IRS uses to identify a taxpayer’s business account.

{mosads}In all, the IRS could be issuing around $2.3 billion a year in these sorts of false payments — or around $11.4 billion over a five-year span.

The IRS does have procedures in place that prevent it from handing out fraudulent refunds, and keeps track of data that could give it even more tools on that front, the inspector general said.

But the agency does not have access to third-party W-2 information that would allow it to verify income and withholding at the time a return is processed.

“With an estimated Tax Gap in excess of $450 billion, it is imperative that the IRS use all available data to increase its ability to detect tax returns with false income and withholding associated with stolen or falsely obtained EINs,” Russell George, the tax administration inspector general, said in a statement.