The Honorable J. J. Pickle (D., Texas),
Chairman Subcommittee on Oversight,
Committee on Ways & Means, U.S. House of
Representatives, Announces Hearings on
Federal Tax Refund Fraud

The Honorable J. J. Pickle (D., Texas), Chairman, Subcommittee on Oversight, Committee on Ways and Means, U.S. House of representatives, announced today that the Subcommittee will hold two hearings on Federal tax refund fraud. These hearings are in follow up to the Subcommittee's February 1994 hearing on efforts by the Internal Revenue Service (IRS) to identify and prevent tax refund fraud.

The first hearing will be held on Thursday, September 29, 1994, beginning at 2:00 p.m., in room B-318 Rayburn House Office Building. The Honorable Margaret Milner Richardson, IRS Commissioner, will appear as a witness. The second hearing will be held on Thursday, October 6, 1994, beginning at 10:00 a.m., in the Committee's main hearing room, 1100 Longworth House Office Building. The Honorable Ronald K. Noble, Under Secretary for Enforcement, Department of the Treasury (Treasury), will appear as a witness. The hearing on September 29, 1994, will focus on Federal tax refund fraud schemes detected by IRS that involve the motor fuel excise tax and claims for refund on the new Form 8849.

Form 8849 is used to claim a refund for excise taxes included in the price of fuel used in a trade or business for certain purposes, such as off-highway business use. Beginning in 1994, taxpayers are allowed to claim a refund for these excise taxes paid during the year at the end of each quarter, rather than waiting until they file their annual income tax return. IRS has identified serious refund fraud schemes involving the motor fuels excise tax, including claims for refund filed by nonexistent companies.

The IRS Commissioner will testify on: recent fraudulent refund claims involving motor fuel excise taxes; the number and types of fraudulent returns involved; and IRS's program to detect and prevent motor fuel excise tax refund fraud, including recent IRS cases. Also, the Commissioner will testify about the results of IRS's recent investigation of motor fuels excise tax evasion schemes.

The hearing on October 6, 1994, will focus on Treasury's review of tax refund fraud conducted by the Task Force on Tax Refund Fraud (TRF Task Force). Under Secretary Noble, who chairs the TRF Task Force, will present the findings of the TRF Task Force regarding: the scope and magnitude of tax refund fraud; the Task Force's recommendations for short-term and long-term reforms in IRS operations to address tax refund fraud; and specific actions Treasury and IRS will take to deal with tax refund fraud in the 1995 filing season.

In announcing the hearings, Subcommittee Chairman Pickle stated: "Earlier this year, the Subcommittee was alarmed to learn that tax refund fraud may be costing taxpayers hundreds of millions -- perhaps billions -- of dollars each year. The Subcommittee's February hearing focused, in part, on specific schemes involving the filing of false individual income tax returns claiming the earned income tax credit and fraud in the electronic filing program. I believe that it is important to realize that tax refund fraud is not limited to individual income tax returns nor to electronically filed returns. Therefore, I have asked IRS Commissioner Richardson to report to the Subcommittee on IRS's program to address motor fuels excise tax refund fraud, and to update the Subcommittee on the recent results of an IRS investigation of a tax evasion scheme involving the tax."

"Further, the Subcommittee's earlier hearing revealed overall weaknesses in IRS's program to identify and address tax refund fraud. In follow-up, Secretary Bentsen established an impartial Treasury review of tax refund fraud with a firm commitment to combat this problem. The Subcommittee will receive an update from the TRF Task Force, next month, and discuss what efforts will be undertaken in the 1995 tax return filing season, and thereafter, to stop tax refund fraud."

Details for Submission of Written Comments:

Persons submitting written comments for the printed record of the hearing should submit six (6) copies by the close of business, Thursday, 3, 1994, to Janice Mays, Chief Counsel and Staff Director, Committee on Ways and Means, U.S. House of Representatives, room 1102 Longworth House Office Building, Washington, D.C. 20515.

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