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> IRS pays out billions in fraudulent tax returns, Identity thieves are getting bolder
Ang
post Aug 2 2012, 10:10 AM
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http://www.cnbc.com/id/48462508

QUOTE
Tax Scam: IRS Pays Out Billions in Fraudulent Refunds

Published: Thursday, 2 Aug 2012 | 11:14 AM ET Text Size By: Eamon Javers
CNBC Washington, DC Correspondent

The IRS is paying out billions of dollars in fraudulent tax refunds to identity thieves; a problem that the tax service’s inspector general told CNBC is a “growing problem” involving numbers that are increasing “exponentially.”

In a new report to be issued Thursday, the inspector general for the IRS says that tax thieves are stealing the identities of taxpayers and then filing bogus returns on their behalf and collecting fraudulent refunds as a result.

The inspector general estimates that the IRS could issue as much as $21 billion in fraudulent tax refunds over the next five years.

The scam is so rampant that thieves are apparently sending in false returns in bulk without even bothering to change the mailing address on the returns. The inspector general said it found one residential address in Lansing, Michigan that was the source of an astonishing 2,137 tax returns, and to which the IRS directed more than $3.3 million in potentially fraudulent refunds.

In another case, a single residential address in Chicago was the source of 765 tax returns, generating more than $900,000 in potentially fraudulent refunds, the report said.

“Once the money is out the door, it is almost impossible to get it back,” IRS inspector general J. Russell George told CNBC. “The bad guys know that the IRS is unable, given the limited number of its staff it has, to address every single allegation of tax fraud it has.”

The report said the identity theft scam is most prevalent in Florida, with two cities, Tampa and Miami, topping the list of potentially fraudulent claims. Tampa saw 88,724 potentially fraudulent returns filed, generating refunds of more than $468 million. And Miami saw 74,496 potentially fraudulent returns generating more than $280 million in possibly bogus returns.

The inspector general concluded that the IRS is simply not doing enough to stop identity theft fraud. “Unfortunately, the IRS is not using information that it currently has, nor information that could be available to them,” George said.

In its analysis, the inspector general’s office said it identified approximately 1.5 million tax returns with potentially fraudulent tax refunds that the IRS had missed during tax year 2010. The potential fraud for that one year totaled in excess of $5.2 billion. That led the report’s authors to estimate that the “IRS could issue approximately $21 billion in fraudulent tax refunds resulting from identity theft over the next five years.”

Among the report’s other findings, was that the “use of direct deposits, including debit cards, to claim fraudulent tax refunds increases the risk that the IRS will not detect identity theft. The IRS continues to allow multiple direct deposits to the same bank account.”

The inspector general recommended that the IRS make certain changes in the way it operates internally, and that it push for new legislation on Capitol Hill that would give it access to the National Directory of New Hires database to help weed out identity theft.

In a response to the critical report, IRS wage and investment division commissioner Peggy Bogandi wrote, “We are devoting significant resources to combat tax refund fraud using stolen identities and have already taken action with respect to issues identified in the report.” And because of actions the IRS has already put in place, she wrote, “we believe that the report’s projection of undetected fraudulent refunds over the next five years is significantly overstated.”


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Ang
post Aug 8 2012, 02:51 PM
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Now it's fraudulent tax returns to immigrants:

QUOTE
http://www.washingtontimes.com/news/2012/a...under-program-/

IRS paid out billions in bogus refunds under program for immigrants
Agency supervisors told employees to ignore red flags

The Washington Times
Wednesday, August 8, 2012


The IRS has paid out as much as $5.2 billion in fraudulent tax refunds to immigrants, and ignored employees who tried to warn agency higher-ups of its mistakes, according to a new audit released Wednesday by the agency’s inspector general.

The Treasury Inspector General for Tax Administration said identity theft fraud could cost the government $21 billion over the next five years unless the IRS takes steps to crack down on the bogus use of Individual Taxpayer Identification Numbers (ITINs) which are issued to immigrants — legal and illegal — in lieu of Social Security numbers, so they can pay taxes.

“TIGTA found an environment which discourages employees from detecting fraudulent applications,” said J. Russell George, the inspector general.

IRS officials said they have already taken some steps to try to combat identity theft fraud, and disputed the potential $21 billion cost to taxpayers.

The auditors took a closer look at fraud after being prompted by senators, who said they’d heard complaints from IRS employees that their warnings were being ignored.

Mr. George confirmed that, saying IRS supervisors were urging employees to turn their backs on potential fraud from identity theft.

“This report is shocking,” said Rep. Charles Boustany, Louisiana Republican, who is chairman of the House subcommittee that oversees the IRS. “It’s one thing if the IRS tries to catch fraud and fails, but it’s quite another when management apparently takes steps to weaken program integrity.”

Identity theft is rampant, particularly for illegal immigrants who need an identity to work in the U.S.

Auditors said one address in Lansing, Mich., was cited in 2,137 tax returns, with a total of $3.3 million in refunds issued to it in 2010.

Tampa, Fla., led the way as the city with the most potentially fraudulent tax returns, with 88,724 filed. A total of $468 million in refunds were issued to those filers.

The auditors said the ability to have a refund deposited directly to accounts, including to debit cards, has been a chief method for fraud. Investigators said not having to deal with a paper check has eased fraudsters’ path — but the details of those schemes were redacted from the report.


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