Bogus income tax filings, uncaught by IRS and SSA bureaucrats, threw U.S. statistical tables out of whack by $32.2 billion

In a perfect example of the need to keep government in check, a $32.3 billion mistake that severely distorted the nation’s 2009 wage statistics was only discovered because the media questioned a federal agency’s suspect data.

The massive blunder slipped by two key government agencies—Internal Revenue Service (IRS) and Social Security Administration (SSA)—and neither will comment on who is at fault, though SSA has asked its inspector general to investigate the embarrassing matter.

Here is what happened, according to the news agency that broke the story and got the government to correct the huge problem: Two people filed multiple income tax forms (known as W-2) that made them multibillionaires and the reports, now believed to be bogus, threw the entire country’s statistical wage tables out of whack.

In government figures released last month, pay for the top U.S. earners quintupled in 2009 to an average of $519 million when in fact they had fallen 7.7% from the previous year to an average of $84 million. The mistake affected the entire nation’s wage statistics, which fell an average of $598 but instead were listed as dropping only $384.

While officials at SSA and the IRS found nothing strange in the unrealistic leap in high-earners’ incomes, thankfully the media did. The feds initially confirmed to a skeptical reporter that the data was correct, but they decided to review W-2s by hand after a story was published citing the improbable stats of record-high wages.

This week SSA officials announced that they found “invalid” wages from two of the 74 top earners listed in its original data. The information originally came from the IRS, which not surprisingly, refuses to comment on the multi billion-dollar debacle.