Thursday, January 12, 2006

Surprise, Surprise, Surprise!

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From WaPo:

Criminal investigators at the Internal Revenue Service froze more than 120,000 taxpayers' refunds last year on suspicion of fraud without notifying the taxpayers or giving them a chance to respond, the national taxpayer advocate said in a report released yesterday.

The advocate's office, which is part of the IRS, looked at a sample of taxpayers who complained that they never received their refunds. In two-thirds of those cases, there was no evidence of fraud. Many of the returns were filed by low-income workers, including some who claimed the earned-income tax credit, which sometimes entitles filers to a cash payment on top of their refunds.

The median adjusted gross income of taxpayers who were found to have committed "no fraud" was $13,330, and the median income of those who claimed the earned-income tax credit was $11,956. The median refund received was $3,685, which represented significant income for the taxpayers involved, said Taxpayer Advocate Nina E. Olson in her annual report to lawmakers on problem areas in tax administration.

Based on data from fiscal 2004, the Taxpayer Advocate Service estimated that as many as 1.6 million refunds have been frozen by the IRS's Criminal Investigation (CI) division over five years.

"At a minimum, this procedure constitutes an extraordinary violation of fundamental taxpayer rights and fairness. In our view, it may also constitute a violation of due process of law," said Olson of the IRS's freezing of refunds without giving taxpayers notice or the opportunity to defend themselves.

Read on....

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