Posted 1 year ago on July 3, 2012, 11:37 p.m. EST by minhaalma
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IRS hit with audit for mismanagement and fraud
Posted: Jul 02, 2012 4:45 PM MDT Updated: Jul 03, 2012 11:44 AM MDT By Bob Segall
INDIANAPOLIS -13 Investigates has learned the tables are turned on a federal agency feared for its ability to audit taxpayers. The IRS is now the focus of a year-long audit, thanks to federal employees who are blowing the whistle.
Howard Antelis does not look intimidating.
The soft-spoken, gray-haired Midwesterner wears khakis and drives an old SUV. He spends most of his free time on a softball diamond, playing with his dogs and delivering meals to the elderly.
But behind the laid-back, guy-next-door image is a longtime federal employee with a dogged personality and a tenacious sense of duty.
And right now, Howard might just be the IRS's worst nightmare.
"I'm horrified and ashamed and embarrassed by what I've seen. It's not supposed to be like this," he told 13 Investigates. "We're supposed to protect taxpayers, so somebody had to say something."
Abuse and fraud
Howard is a tax examiner at the IRS's ITIN processing center in Austin, Texas.
The large, unmarked building in south Austin is where the IRS decides whether to issue an Individual Taxpayer Identification Number to the millions of illegal immigrants who apply for them. An ITIN allows undocumented workers to file tax returns and pay taxes, a legal requirement for those who earn income in the United States … even those who come to the country illegally.
But 13 Investigates discovered the ITIN system is plagued by abuse and fraud.
A four-month Eyewitness News investigation documented how many illegal immigrants use ITINs to get tax credits and refunds they're not entitled to. WTHR also exposed how millions of undocumented workers get their ITIN applications approved using phony documents.
The problems identified by 13 Investigates cost American taxpayers billions of dollars every year, according to a 2011 report from the U.S. Treasury Department's Inspector General for Tax Administration.
After seeing WTHR's investigations, Howard contacted 13 Investigates to say the problems inside the ITIN processing center are more serious and systemic than originally reported.
"A license to steal"
"We were being told by upper management to ignore fraud, to assign ITIN numbers and ... pay out refunds to people who are lying," Howard explained. "It's a license to steal when you allow that."
Howard and five other tax examiners at the ITIN processing center in Austin all told WTHR the same thing: for years, IRS managers have instructed them to "look the other way" while processing ITIN applications that appear to be filed fraudulently – even when those applications contain clear signs of criminal activity.
For example, Howard received a stack of ITIN applications for dozens of children attending the same school in South Carolina. (Adult tax filers can request an ITIN for a child if they want to claim that child as a dependent in order to get child tax credits and a larger tax refund.) When he researched that school, he discovered it didn't even exist. When Howard reported the apparent scam to his bosses, he claims his managers ordered him to approve the applications anyway.
"C'mon. This is fraud! Those kids weren't even real and I'm supposed to give out [ITIN] numbers?," Howard recalls asking. "We're tax examiners but the truth is we're not supposed to look into anything. We're not supposed to examine anything. It's like an assembly line. It's just ‘Get it out of here. Boom. Boom. Boom. Get it out of here and don't worry about the fraud. Fraud slows us down.'"
After years of reporting that fraud directly to his bosses -- with no success -- Howard decided to take drastic action.
"I've been working for the federal government for 23 years and I signed an ethical standard of conduct when I went to work that says if you see fraud, you need to report it. I tried and tried and tried, couldn't get anywhere so … I went into a quiet room and started making phone calls."
Those phone calls went to the Inspector General's office in Washington, D.C.
The IG's office confirms it then dispatched auditors to Texas to interview Howard and dozens of other tax examiners. That's when investigators learned IRS employees were actually encouraged to ignore signs of fraud.
The Inspector General's latest investigation has taken more than a year. A final audit will be released this summer, and it's expected to give further proof of what Eyewitness News first exposed this spring – that millions of undocumented workers can get ITINs by filing fraudulent paperwork.
"The IRS is not doing something as simple as requesting sufficient documentation," Inspector General Russell George told WTHR this spring. "It's very troubling."
New details about mismanagement at the IRS's ITIN processing center provide even more cause for concern.
"It's pure negligence by management and they've been trying to keep it quiet," Howard said. "There is a criminal element that is defrauding the U.S. government by filing mountains and mountains of these fraudulent applications. We see them in piles in bulk every day that are obviously not legitimate documents and not legitimate tax returns and not legitimate wages … and [IRS managers] don't want to deal with it. That's where all the fraud is. The fraud is in the fake notary stamps and fake documents which we've been accepting."
In order to obtain an ITIN, applicants must send the IRS documents that show proof of identification and residency. Among the acceptable documents are original or notarized photocopies of birth certificates, driving records, voter ID cards, school records and vaccination records.
Howard and other ITIN tax examiners say those documents are easily forged and notary stamps on the paperwork are meaningless because many of those are fraudulent, too.
"There is a state-by-state list of notaries that shows which are registered and legitimate, but the IRS won't let us check those registries. We're not supposed to Google anything or look anything up," Howard said. "The basic problem is they give [tax examiners] no training and no tools to even know what they're looking for."
That is about to change.
Just days after WTHR first reported on ITIN mismanagement and fraud, the IRS sent senior officials from Washington to the ITIN processing center in Austin.
Steve Miller, the agency's Deputy Commissioner for Services and Enforcement, met with more than 100 ITIN tax examiners and, according to IRS staff who attended the meeting, Miller promised to address problems identified by workers and WTHR.
Despite repeated requests for an interview, Miller and IRS management will not meet with WTHR to discuss those problems.
But facing growing pressure, the IRS has now announced it will begin cracking down on ITIN fraud.
13 Investigates has learned tax examiners are now getting more training and much-needed tools to help identify bogus paperwork. Their work stations will soon be equipped with ultraviolent lights and magnifying glasses to help them better inspect documents. ITIN managers and trainers are going to Washington this week to learn about fraud prevention.
At the same time, the IRS has tightened its ITIN application process. Effective immediately, undocumented workers must prove their identity through original, certified documents. Notarized photocopies, which are much easier to forge, will no longer be accepted. In a written statement, the IRS announced it will spend the next six months reviewing all areas of the ITIN program. By the end of the year, the agency will issue more comprehensive rules to further reduce fraud.
"That's a huge step in the right direction," Howard said. "Because of the Inspector General and all of the media attention, things are finally starting to change. For the first time in a long time, I feel like this might get fixed."
Simply by speaking out, the quiet tax examiner could save taxpayers billions -- but at a personal cost.
A few days after Howard met with WTHR, the IRS slashed his job performance rating which will affect his paycheck. The IRS claims every aspect of Howard's job performance dropped during the past six months, shifting his overall rating from "exceeds fully successful" to "minimally successful." Howard believes the poor review is retaliation for blowing the whistle on his managers. He wonders what might happen next.
"I'm a little nervous, but not really. I guess they could try to fire me, but I don't think they will," he said, vowing to continue his fight for ITIN reform. "I just want to see things fixed. We've been allowing the U.S. taxpayer to get robbed for years now and those days appear to be over."