When 5 Billion is a small number

Those who saw the IRS Director on CBS' 60 Minutes this past week, must have wondered why they hadn't done anything about a simple fraud affecting 3,000,000 people every year, costing them time to stand in lines a mile long to resolve a problem they didn't cause.  It is causing losses of $5 Billion a year, slightly less than the theft of credit cards has cost Target so far.

All it takes is filing a fraudulent tax return using a stolen social security number, which everyone seems to use as an id number, in spite of rules to the contrary. Why we continue to accept that is beyond me.  IRS has made it easy to do, by assisting the fraud by dubious ways to make payment to a debit card making the money portable.  They were sending checks to the same address for hundreds of people, but anyone living in a condo knows how that can be.  Still, matching is a typical way to discover this kind of fraud and its obvious they aren't doing it.

Their problem is simple.  It isn't that much money.  The Treasury takes in $3 Trillion in revenue every year and it keeps going up.  $5 Billion is less than 1%, and maybe all the fraud schemes like filing multiple returns across IRS Regions, and the myriad of schemes to keep from paying taxes at all, don't add up to more than 2%.  They might easily say, "acceptable loss" to anyone who was looking into it.

Only that isn't the way you determine what is acceptable.  They should be looking at how much it costs to cross match returns, and how much would they recover. Maybe that answer would be more revealing than the current fraud. They have to prosecute the cases and they get no revenue when it is over.  Maybe that is what they mean by acceptable loss.  

The credit card industry was doing the same thing with stolen credit cards and the numbers had to get really big for them to do anything about it.  The 60 Minutes show alluded to the same thing happening with this fraud.  Before they will act, the numbers will be $100 Billion yearly, or something in that neighborhood.    

Maybe one of the questions the Hill should be asking in this next round of hearings is "What is the number that you need to make this loss unacceptable?"