IRS Stung By Slavery Tax Credit Scams

by Mike Godfrey, Tax-News.com, Washington

16 April 2002

The US Internal Revenue Service revealed Friday that despite having issued an alert to African American taxpayers in January over bogus 'slavery reparation' tax credit schemes, it paid out more than $30 million in erroneous tax refunds in 2000 and 2001.

According to a report in the Washington Post on Saturday, one IRS official is under investigation for helping to process the returns, and at least twelve current and former employees of the tax agency are known to have claimed the credit themselves.

In a new initiative launched Monday, the IRS will be levying a $500 fine on anyone who fails to withdraw the claim if discovered. However, the revelation that the value of mistaken tax refunds is so much higher than previously estimated has certainly been highly embarrassing for the revenue department.

'You've got to look at the big picture,' an IRS spokesman told the Washington Post. 'Our system does catch the vast, vast majority of these. But things happen, and a check goes through.'

Although many of the erroneous refunds were for around $43,209 (a figure suggested by Essence magazine in 1993 as the updated value of 40 acres and a mule, promised to freed slaves by a Union general during the Civil War), the IRS has revealed that one taxpayer received $500,000 in refunds, the majority of which was successfully recovered. However, the agency has refused to reveal how much has been recovered overall.

The Chairwoman of the Congressional Black Caucus, Eddie Bernice Johnson, attempted at the weekend to explain the popularity of the scam, despite a coordinated campaign conducted by political figures, church leaders, and community organisations: 'People are easily fooled because sometimes someone gets something,' she observed.

She added that it was unforntunate that the IRS had not been more successful in screening tax returns for these claims. 'All it does is put people in the position to have to pay the money back with interest and penalties.'

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