TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Friday, March 30, 2012

IRS Loses Billions in Tax Refund Fraud

Wall Street Journal, Billions Lost in Tax-Refund Scam:

Federal authorities are struggling to crack down on what they describe as a widespread scheme that has already likely defrauded the IRS of billions of dollars using the stolen identities of Puerto Rican citizens.

The perpetrators of the scheme, authorities say, swipe the Social Security numbers of Puerto Rican citizens, who don't have to pay federal income tax—and are less likely to be on the IRS radar—and use their information to file fake returns. In some cases, they enlist U.S. mail carriers to intercept the refund checks that are disbursed.

The plot, which includes participants from around the U.S. and Latin America, has been around for at least five years. Prosecutors have obtained multiple convictions but none involving those believed to be among the top players in the operation, according to several people briefed on investigations into the fraud.

"What we have uncovered may very well be the tip of the iceberg," said Manhattan U.S. Attorney Preet Bharara, whose office was among the first to investigate the group. "It's a massive fraud."

Between October 2010 and June 2011, the IRS received phony tax returns based on stolen Puerto Rican identities that would have led to the disbursement of $5.6 billion to alleged fraudsters, two of these people said. It is unclear how much money the IRS ultimately sent but one person familiar with the matter said an estimated $2 billion in checks was distributed.

WSJ Chart

http://taxprof.typepad.com/taxprof_blog/2012/03/irs-loses.html

Tax | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341c4eab53ef0167647059b3970b

Listed below are links to weblogs that reference IRS Loses Billions in Tax Refund Fraud:

Comments

I suppose it would be wrong to point out that Republicans in particular
refuse to grant the IRS sufficient funding to combat tax fraud, then
use the existence of tax fraud to rail against taxes and the IRS in general.

Posted by: David R | Mar 30, 2012 1:13:10 PM

Someone on Althouse said the daughter filed her return electronically. There was a problem, because someone already filed her return electronically. Maybe HHS should actually do something when they first get the report of stolen SS#s? But Sebelius is too busy protecting TSA agents.

Posted by: Sandy P | Mar 31, 2012 10:31:51 AM

The IRS is not diligent enough, and from personal experience seems apathetic to the issue.

Posted by: Emily | Apr 4, 2012 11:01:51 PM