IRS to Check for Aid Applicants’ Unlisted Income

The Internal Revenue Service will cross-check the name and Social Security number of every applicant for welfare, food stamps and Medicaid this fall for the first time in a search for unreported interest or dividend income that could make them ineligible for those programs.

The new “computer match” will be the broadest use of IRS information ever authorized by Congress for non-taxable purposes, other than routine statistical uses, according to Sen. William S. Cohen (R-Me.).

The IRS historically has tried to keep its records private. “If we make the IRS into an information lending library for government agencies, we are likely to undermine our tax system of voluntary compliance,” former IRS Commissioner Donald Alexander said.

Civil libertarians also complained that the plan threatens an invasion of privacy.

Congress ordered the IRS to participate in an income and eligibility verification system in 1984 as part of its effort to weed out ineligible beneficiaries and reduce the federal deficit. The checks are not intended to help the IRS find more income to tax, but to cut the cost of assistance programs by spotting people who are not disclosing all their income sources to welfare and other agencies.