IRS pays imaginary slavery tax credit
Washington Post
WASHINGTON - The Internal Revenue Service, flooded by more than 100,000 tax returns seeking non-existent slavery-tax credits, mistakenly paid out more than $30 million in erroneous refunds in 2000 and 2001.
One IRS employee is under investigation for allegedly helping process returns that claimed the credit, officials said Friday. At least 12 current and former IRS employees, all low-level workers in processing centers, applied to receive the credit.
While it has been known for years that some fraud artists advertised the false credit and offered to help blacks get it - for a fee - this is the first indication the cost to the government has been as high as $30 million.
Many of the mistaken payments, including one to a former IRS employee, were for $43,209.
That's the figure Essence magazine suggested in an article on the subject in 1993 as being the updated value of 40 acres and a mule - which some freed slaves were briefly given during the Civil War.
Claims for the reparation credit totaled $2.7 billion just in 2001, an IRS spokesman said.
The tax agency is now trying to recover the money it paid out, though officials would not disclose how much has been collected.
In one case, a taxpayer received $500,000 in refunds, and the IRS said "most" of the money was returned after it sued.
"You've got to look at the big picture," IRS spokesman Terry Lemons said.
"Our system does catch the vast, vast majority of these. But things happen, and a check goes through," he said.
Starting Monday, the IRS will begin levying a $500 fine on taxpayers who do not withdraw the claim if they have been caught.
A number of prominent blacks have pushed for some sort of compensation for the nation's legacy of slavery, but no law has been enacted.
The IRS has waged a high-profile campaign to alert blacks about the marketing of the false credit claims. The agency previously has conceded it has mistakenly paid some claims, but an investigation by the Treasury Inspector General for Tax Administration concluded last month it was significantly higher than reported.
The agency used to rely on manual detection to catch the false claims, but has begun using a computer program that identified 96 percent of returns seeking the credit.
Officials say the reparations credit claims began appearing on tax filings after the Essence article cited the $43,209, and many of the returns seek exactly that amount.