From the January 17, 2006 edition of the weekly Food Research and Action Center (FRAC) News Digest: The Digest highlights what's new on hunger, nutrition and poverty issues at FRAC, at the U.S. Department of Agriculture, around the network of national, state and local anti-poverty and anti-hunger organizations, and in the media. Subscribe to the weekly FRAC News Digest

(“I.R.S. Limited Tax Refunds of Poor, Congress Is Told,” nytimes.com, January 10, 2006)

The tax refunds sought by hundreds of thousands of low-income Americans were frozen and their returns labeled fraudulent by the Internal Revenue Service without any notification, according to a report by the IRS taxpayer advocate, Nina Olson. Affected taxpayers had an average income of $13,000. They were seeking the earned income tax credit, a benefit for the working poor, and their requests were assigned questionable status by an IRS criminal division’s computer program.

Once a return is flagged, future requests by the same taxpayer also are frozen for a number of years which IRS rules prohibit the advocate from specifying publicly. Olson reported that the IRS devoted more resources to investigating questionable refunds to the poor, worth no more than $9 billion, than to a $100 billion problem involving unreported incomes from small businesses. Olson found that the IRS owed all the money, or more, to two-thirds of the taxpayers who pursued their refunds, and it was unfair, and a waste of resources, to withhold refunds from poor people when, at most, one in five of them appeared not to be due refunds. Leslie M. Book of Villanova University commented: “Freezing refunds without giving taxpayers process is an extremely dangerous way to administer the earned income tax credit. These taxpayers often need more rather than less protection because they are not sophisticated, are afraid of government involvement.”

http://www.truthforachange.info/news/irsthefts.php (the story was removed from nytimes.com but is available at this address)

For the full report from IRS Tax Advocate Nina Olsen see

http://www.irs.gov/pub/irs-utl/section_4.pdf

I suggest that any person so affected contact either their local legal services program or the IRS taxpayer advocate.

To contact a local legal services program see the listings at

http://www.rin.lsc.gov/scripts/LSC/PD/PDList7.asp

To contact the Taxpayer Advocate: 

• Call the Taxpayer Advocate Service toll-free telephone number: 1-877-777-4778 or TTY/TTD: 1-800-829-4059.
• Call, write or visit the Local Taxpayer Advocate office for your state.  [ View Local Taxpayer Advocates by State] 
• A list of Taxpayer Advocate Service offices may also be found in Publication 1546 (English, Spanish, Chinese, Korean, Russian, Vietnamese), The Taxpayer Advocate Service of the IRS.   

See my earlier article from December 29, 2005 about the Earned Income Tax Credit which begins:

The Earned Income Tax Credit (EITC), sometimes called the Earned Income Credit (EIC), is a refundable federal income tax credit for low-income working individuals and families. The Child and Dependent Care Tax Credit (CTC) is another program and is partially the subject of this article. In my opinion these are the best anti-poverty programs in the United States. In this article you will find up-to-date links with many organizations that provide help, tool kits, links to translations of material in many languages in addition to English and Spanish. Groups such as the National League of Cities, women’s organizations, anti-poverty programs legal services and volunteer tax preparers are discussed here.  Employers can assist employees who are eligible for EITC through a facet of the tax credit program.