Service of Slipping Through Cracks the Size of the Grand Canyon: I.R.S. Asleep at the Switch

July 5th, 2022

Categories: Charity, Due Diligence, Taxes, Vet


Image by Gerd Altmann from Pixabay

I overdo it by flagging receipts that indicate charitable donations or medical bills throughout the year to help with tax prep and in the event I get a dreaded I.R.S. notification that I’m being audited. It has happened to several friends of modest means and standard sources of income. The I.R.S., which claims it doesn’t have the staff to catch scofflaws, seems to waste time on microscopic fries while letting master cheaters they have been alerted to fly free.

David A. Fahrenthold, Troy Closson and Julie Tate reported on a flagrant example in their article “76 Fake Charities Shared a Mailbox. The I.R.S. Approved Them All.

The American Cancer Society alerted the IRS to one fake–American Cancer Society of Michigan headquartered in a Staten Island PO Box–run by Ian Hosang, previously convicted for stock market fraud and barred from the industry in 1997. Hosang next launched another scam–the United Way of Ohio at the same “headquarters.” The reporters wrote that the “long-running charity fraud that has astounded nonprofit regulators and watchdogs — [and] raised concerns about the I.R.S.’s ability to serve as gatekeeper for the American charity system.” Hosang had also warmed his heels in jail for two years for fraud and money laundering.

According to the reporters, the I.R.S. approved all but one in 2,400 applications from potential charities. “The agency declined to answer questions about Mr. Hosang’s case, citing taxpayer privacy laws. It also declined to make officials available for in-person interviews, but it released a written statement saying that the fast-track approval system ‘continues to reduce taxpayer burden and increase cost effectiveness of I.R.S. operations.'”


Image by Alexas_Fotos from Pixabay

Hosang, who said he was filled with remorse, asked the reporters “’If you file something with an agency and they approve it, do you think it’s illegal?”

In addition to the faux American Cancer Society of Michigan, he created them for Detroit, Green Bay, Cleveland and for Children to name a few–17 in this disease group alone. The real American Cancer Society launched local and national initiatives with a lawyer to alert the I.R.S. “American Cancer Society officials said they never heard back from the I.R.S.”

“The first problem,” wrote the reporters, “according to former I.R.S. officials: Tax law does not prohibit nonprofits from impersonating better-known nonprofits by using sound-alike names. The second: There are no systematic checks for a history of fraud.” They quote a former employee who admitted you could apply for tax-free status from jail.

They reported: “One 2019 study by the agency’s taxpayer advocate found that 46 percent of the applicants it approved were not actually qualified, usually because their charters did not conform to charity law. It also noted that the ‘mission statements’ were often so vague as to be useless. In 2021, federal records show, the I.R.S. approved groups whose mission statements were, in their entirety, ‘CHARITABLE ACTIVITY,’ ‘NON-PROFIT’ and ‘Need to fill in’ (possibly a forgotten note to self).”

There’s more but you get the gist.

Shouldn’t a simple search of prison records be part of a fast-track I.R.S. charity approval system? Given the lax approach to this aspect of the I.R.S.’s responsibility, do you think Joe and Jane Citizen are also pretty safe from scrutiny?

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4 Responses to “Service of Slipping Through Cracks the Size of the Grand Canyon: I.R.S. Asleep at the Switch”

  1. Lucrezia Said:

    Lucrezia on Facebook: Appropriate laws appear to feature as many holes as in Swiss cheese., Free room & board courtesy of a jail sentence only further strains the taxpayer purse. This looks like an excellent topic for upcoming elections, assuming one or both parties aren’t too lazy to take it on.

  2. Jeanne Byington Said:

    Lucrezia,

    Makes sense. Laws to tighten this leaking ship would close down fraudulent activity that diverts money from where it should go but also, hopefully, force the cheaters to find a means of supporting themselves that involves paying taxes–a win-win.

  3. Martha T Takayama Said:

    It seems that these Swiss cheese style tax laws are perhaps symptomatic of lots of other things that really do not seem to function in many areas of government now. I wonder if or what kind of security we have with regard to domestic terrorism and mass shootings. Just this past weekend a group of about 100 neo Klu Klux Klanners with their faces swathed in white to cover their cowardice and identity, garbed in blue shirts, khaki pants and accessorized with huge shields invaded and calmly lined the streets of fashionable areas of Boston and swarmed into the subway. there did not seem to be a policeman in sight, nobody including the mayor has any idea who they are, and it seems no one had any idea that they were coming. What kind of monitoring by what agencies constantly prove to have not noticed mass shooters endless and well visited hate postings and invitations. Do we know who is on first?

  4. Jeanne Byington Said:

    Martha,

    I am shocked by your story. It is as disturbing an example of how our watchdogs are sound asleep as mine is and the potential impact of their slumber

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