E-Verify Can Stop Refund Fraud

10 Pages Posted: 30 Mar 2013 Last revised: 24 Apr 2013

See all articles by Richard Thompson Ainsworth

Richard Thompson Ainsworth

NYU - Graduate Tax Program; Boston University - School of Law

Andrew Shact

Boston University - School of Law

Date Written: March 27, 2013

Abstract

Two issues in the current Washington debates need to be linked. E-Verify, the Internet-based database that allows employers to verify an employee’s work eligibility that is at the center of the immigration debate, is the ideal tool for stopping tax refund fraud. All that is needed is a digital signature of the E-Verify result, and the mandatory inscription of this signature on tax documents to make them self-authenticating.

The central features of this proposal have been made before. The technology it requires is tried and proven. The processes and procedure it advocates are in place and effectively deployed in foreign jurisdictions, notably in VAT jurisdictions enforcing against VAT fraud.

The heart of this linkage (the E-Verify/refund fraud linkage) is numerical. At least $5.2 billion in annual revenues are being lost through refund fraud – the cost for businesses to implement a fully mandated E-Verify system is $2.7 billion. If E-Verify solves refund fraud, there are funds available for a business credit with a considerable amount of money left over.

The $5.2 billion figure comes from the Treasury Inspector General for Tax Administration (TIGTA) who found that in Processing Year 2011, identity theft cost the US taxpayer in excess of $5.2 billion in undetected fraudulent tax refunds, and estimated $21 billion in losses over five years. The $2.7 billion figure comes from a Bloomberg Report for the same time period indicating that a fully mandated E-Verify system for all employers would cost $2.7 billion (almost all of it in training expenses related to system implementation and worker appeals).

Keywords: E-Verify, Refund fraud, Secure tax documents, Encryption, Digital signature

JEL Classification: H29, K14, K19, K34, K39, K42, K49

Suggested Citation

Ainsworth, Richard Thompson and Shact, Andrew, E-Verify Can Stop Refund Fraud (March 27, 2013). Boston Univ. School of Law, Law and Economics Research Paper No. 13-6. Available at SSRN: https://ssrn.com/abstract=2240462 or http://dx.doi.org/10.2139/ssrn.2240462

Richard Thompson Ainsworth (Contact Author)

NYU - Graduate Tax Program ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Andrew Shact

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

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