Arizona targets tax fraud with new computer program

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By Catherine Holland By Catherine Holland

PHOENIX – With a new computer program as its weapon, the Arizona Department of Revenue says it will crack down on tax fraud this year.

Illegal immigrants will likely make up a large portion of those caught by the program although Department of Revenue administrators say they are not the target.

The computer program will flag people whose federal tax-identification numbers do not match the information on their W-2 forms. Those people will not receive their refunds until they can prove that they are the ones who actually did the work and paid the taxes.

One tax preparer who works extensively with Spanish speakers told an Arizona newspaper that this crackdown will hurt the Hispanic community.

Tax laws apply to anyone who earns money in the U.S., regardless of his or her immigration status. Both the Arizona Department of Revenue and the federal Internal Revenue Service encourage illegal immigrants to file income-tax forms to comply with those laws.

Those who are not eligible for a Social Security number, including illegal immigrants, must apply for an Individual Tax Identification Number, which they then use to file their tax forms.

Because it is against the law in Arizona to knowingly hire people who are not in the county legally, illegal immigrants often use a false or stolen Social Security numbers to get their jobs. Those false and stolen numbers are what appear on the illegal employees’ W-2 forms.

According to the Arizona Department of Revenue, about 60,000 Arizona residents used Individual Tax Identification Numbers to file their taxes last year. When the Department of Revenue sampled those returns, between 80 and 85 percent did not match the information provided on the associated W-2 forms. The department did not say exactly how many returns it examined.

The new program the department is implementing this year will allow them to look at every return filed using Individual Tax Identification Number.

The department is working on the documentation required for individuals to prove they did the work and paid the taxes they claimed on their returns. Department of Revenue administrators say they want to issue refunds to everyone who earned one, regardless of his or her legal status.

It’s believed that Arizona is the first state to make the comparison between Individual Tax Identification Numbers and W-2 information and withhold returns if they do not match.