Tax Law

IRS May Have Paid ID Thieves $5B in 2011 Refunds; $3.3M Went to One Address Listed On 2,137 Returns

Amidst news reports of a spike in fraudulent federal tax refund claims by identity thieves, a U.S. Treasury Department audit has found that the Internal Revenue Service is an easy target for such fakery.

The IRS may already have paid ID thieves $5 billion in tax refunds to which they were not entitled, and could be on the way toward paying another $21 billion to ID thieves over the next five years, reports the Associated Press.

Some $3.3 million in refunds went to one Michigan address listed on 2,137 returns, the audit found. More than $3 million also went to three Florida addresses listed on some 500 returns.

J. Russell George, the inspector general for tax administration at the Treasury department called the audit results “extremely troubling” and said auditors “found multiple reasons for the IRS’s inability to detect billions of dollars in fraud.”

However, it appears that the lack of an effective computerized database system for red-flagging such duplication, as well as modern-day reliance on the direct deposit of tax refunds into bank accounts, plays a significant role. Issuing paper checks for tax refunds presents more of a challenge to those who file fraudulent refund requests, the article explains, because they must both be sent to a physical address and, before they can be cashed at a bank, require identification to be presented.

The IRS says the $21 billion figure is too high and has instituted measures to try to reduce the refunds being issued to those who file fraudulent returns.

Related coverage: “Authorities Say Woman Used TurboTax to Get Fraudulent $2.1M Refund on False $3M Earnings Claim” “Woman Accused of Misusing Popular Tax Software to Obtain $2.1M Tax Refund Asks for Public Defender”

Associated Press: “Woman who falsely claimed a $2.1 MILLION tax refund and went on $150,000 spending spree is jailed for five years”

Associated Press: “Oregon disciplines tax workers over $2.1M refund”

Updated at 9:22 a.m. to include link to additional Associated Press coverage.

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