IRS Threatens Shutdown, Delaying Tax Refunds To Fund ObamaCare Amid Budget Cuts

The Internal Revenue Service (IRS) is claiming modest budget cuts are forcing them to consider a short-term shutdown and delaying tax refunds next year. IRS Commissioner John Koskinen laid out cost-cutting details Thursday, including a plan to cut taxpayer services, fraud prevention and enforcement.

“Everybody’s return will get processed,” Koskinen told reporters. “But people have gotten very used to being able to file their return and quickly getting a refund. This year we may not have the resources, the people to provide refunds as quickly as we have in the past.”

Koskinen said that the agency is prioritizing the implementation of President Obama’s deeply unpopular health care law, better known as ObamaCare, over taxpayer refunds and fraud enforcement. This is the first year taxpaying Americans will have to disclose whether they have health insurance or not. While the IRS has issued the majority of tax refunds within 21 days in past years, Koskinen said he couldn’t estimate how long they might be delayed in the upcoming filing season that begins in just a few short weeks.

Congress cut the IRS’s giant $10.9 billion budget by a meager $346 million for the budget year that ends in September 2015, which is $1.2 billion less than the agency received in 2010. The agency has suffered the budget-cutting wrath of congressional Republicans for targeting conservative groups seeking tax-exempt status for political reasons.

“In some ways, these budget cuts are really a tax cut for tax cheats,” Koskinen said. “Because to the extent we have fewer people to audit and enforce the tax code, that means some people cutting corners on their taxes or not complying are going to get away with it, and that is a decision that Congress has made.”

Koskinen also said the IRS is imposing a hiring freeze, though they have already hired a small army to implement ObamaCare, and is also eliminating nearly all employee opportunities for overtime.

Nevertheless, Koskinen claimed the filing season would start on time next month, yet he refused to say when the agency would announce the date. Each year, millions of taxpayers file their returns in the first few weeks of the filing season hoping to get a refund as fast as possible, which averaged roughly $2,800.

However, critics say cutting fraud prevention services will not only exacerbate the agency’s problems, but is the exact opposite of the action needed to solve a large part of its financial problem.

According to a study from the Center for Immigration Studies, which was written by CIS fellow David North, the IRS shelled out $4.2 billion alone for what is known as the “additional child tax credit” in 2010 to those using an individual taxpayer identification number (ITIN). According to the agency’s own internal report, ITINs are usually indicative of an illegal immigrant, which has served as a bastion for fraud in recent years via the ACTC.

The “additional child tax credit” was initially enacted to help out those who make too little to qualify for the full child tax credit and is refundable even if a “taxpayer” doesn’t owe income tax. According to the IRS, illegal immigrant workers’ use of the tax credit has skyrocketed from 796,000 filers in 2005 to 1.5 million in 2008, and increased to 2.3 million in 2010.

IRS investigators uncovered one address in Atlanta where 23,994 ITIN-related tax refunds were paid out, including 8,393 refunds deposited to a single bank account. Mr. North also said the IRS must begin to look for filings where an ITIN filer claimed no dependents the prior year, but four or five dependents the next year.

In Frankford, Delaware, a town of only 862, Mr. North found one address where 627 ITINs were registered. Similarly, in Parksley, Virginia, Mr. North found a single address where 100 ITINs were registered, yet the town has just 847 residents.

The IRS refused to comment on these findings.