Billions Lost to Tax Identity Theft Refund Fraud

Tax Identity Theft Rakes in Billions more than IRS Detected

Identity Theft and Tax FraudThe Treasury Inspector General for Tax Administration (TIGTA) estimates that in the next 5 years the IRS will issue $21 BILLION in fraudulent tax refunds. 

The IRS said they detected 938,664 tax returns in 2011 amounting to $6.5 billion in fraudulent tax identity theft refunds issued.

 TIGTA released the findings of their audit on tax identity-theft fraud Aug. 2. The audit uncovered approximately 1.5 million additional tax refunds that were “potentially” fraudulent. The 1.5 million returns amount to an additional $5.2 billion in fraudulent refunds.

The Treasury Inspector General for the Tax Administration, J. Russell George, said in a press release Aug.2 that the IRS does not adequately detect fraudulent tax returns.

“We found multiple reasons for the IRS’s inability to detect billions of dollars in fraud. As identity theft is the most frequent consumer complaint, and at a time when ever dollar counts, these results are extremely troubling.” He said.

BILLIONS of taxpayer dollars being given to thieves is much more than troubling. Ludicrous and absolutely unacceptable seems like more appropriate verbiage.

 “Undetected tax refund fraud results in significant unintended Federal outlays and has the potential to erode taxpayer confident in our Nation’s system of tax administration,” George continued.

$11.7 Billion, the estimated fraudulent return amount, is about 5% of the total monies returned to taxpayers in 2011, which adds to $315 billion total.

USA Today reported a few very ‘troubling’ examples of the IRS’s oversight of fraudulent tax claims. The IRS calculated and paid out 2,137 refunds whose returns all used the exact same address in Mich.

The IRS also deposited 590 tax refunds into the same bank account. The total amount deposited into this account was over $900,000.

The IRS said that losing $21 billion in the next five years is an inaccurate estimate because they plan to implement TIGTA’s recommendations to improve their tax fraud prevention methods. They also hope to expand IRS access to the National Directory of New Hires database which they believe will help but legislation will need to be passed in order for this to happen.

TIGTA responded that their estimate of $21 billion was already calculated with these suggested preventative measures in mind.  This estimate is a reduction to reflect the amount of fraudulent refund monies even after the IRS implemented the new filters which will protect some of the funds.

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