IRS May Lose $21bn to Tax Scammers

According to a Treasury audit, the Internal Revenue Service may have unwittingly handed out $21 billion to identity thieves who filed fraudulent tax returns for 2011.

While the IRS identified about 1 million false returns and blocked about $6.5 billion in fraudulent refunds in 2011, a new report by the Treasury inspector general for tax administration reveals that as many as 1.5 million additional returns claiming $5.2 billion in fraudulent refunds might have escaped detection.

According to a Treasury audit, the Internal Revenue Service may have unwittingly handed out $21 billion to identity thieves who filed fraudulent tax returns for 2011.

While the IRS identified about 1 million false returns and blocked about $6.5 billion in fraudulent refunds in 2011, a new report by the Treasury inspector general for tax administration reveals that as many as 1.5 million additional returns claiming $5.2 billion in fraudulent refunds might have escaped detection.

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

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The IRS is the US government agency responsible for tax collection and tax law enforcement.

CNBC noted:

[quote] 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. [/quote]

In a statement, J. Russell George, treasury inspector general for tax administration said the “results are extremely troubling”, especially “at a time when every dollar counts”. 

“Undetected tax refund fraud results in significant unintended federal outlays and has the potential to erode taxpayer confidence in our nation’s system of tax administration,” he added.

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The inspector general’s report said the IRS has taken several steps to address tax-related identity theft fraud. The issue has become an agency priority, the report said, and the IRS has improved in identifying fraud patterns.

The statement also said:

[quote] To date for this year, almost $12 billion in confirmed refund fraud has been stopped, and at least half of this is confirmed identity theft. The amount stopped will continue to grow, and the IRS is on pace to significantly exceed the amount of confirmed refund fraud prevented compared with prior years. [/quote]

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