Sunday, April 23, 2006

A Little information !!!

Here is a little excerpt from a 1999 IRS internal Audit Report.


FROM: Pamela J. Gardiner /s/ Pamela J. Gardiner
Deputy Inspector General for Audit

SUBJECT: Final Audit Report – The Internal Revenue Service’s Individual Taxpayer Identification Number Program Was Not Implemented in Accordance with Internal Revenue Code Regulations

This report presents the results of the subject audit report. In summary, the Internal Revenue Service (IRS) Tax Identification Number (ITIN) program implementation was reviewed for conflicts with laws and regulations; impact on other IRS programs; and operational effectiveness. ****2a,2b,2e****. Over 340,000 of the ITINs were issued to self-documented illegal aliens. Our concerns are whether: the information on illegal aliens should be shared with the Immigration and Naturalization Service; illegal aliens should be treated as residents for tax purposes; ITIN causes revenue protection issues; and, whether operational problems during the implementation were corrected.

Recommendations were made to: bring legal issues to the attention of the Joint Committee on Taxation for the Confidentiality of Tax Information Study; bring to your attention the taxation of illegal aliens; implement revenue protection controls; and correct operational conditions.

The IRS generally agrees with the report recommendations. The disclosure issue will be forwarded to the Joint Committee on Taxation. Likewise, the Assistant Commissioner (International) will discuss with you the taxation of illegal aliens as United States residents. However, the revenue protection actions are seen as needing legislative remedy. The Office of Audit disagrees that the IRS should not take any action on this recommendation. Subsequent to the issuance of the draft report, the Office of Audit determined that there were 180,662 Tax Year 1997 Form 1040 returns filed with the ITIN as the identifying number.

The IRS needs to examine the overall Revenue Protection Strategy to ensure that returns with ITINs ****2a,2b,2e****. This could be done on a sample basis. The operational conditions are being addressed.

Management’s comments have been incorporated into the report, where appropriate, and the full text of their comments is included as an appendix.

Copies of this report are also being sent to IRS managers who are affected by the report recommendations. Please contact me at (202) 622-6510 if you have questions, or your staff may call Parker Pearson, Acting Associate Inspector General for Audit (Small Business & Corporate Programs), at (202) 622-5955.

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