IRS Gives Prison Inmates Millions In Tax Refunds

More than a decade after government investigators exposed an epidemic of prison inmates fraudulently receiving tens of millions of dollars in tax refunds, the problem is still rampant and the Internal Revenue Service (IRS) keeps cutting checks to incarcerated criminals.

The scandal of jailed convicts getting tax refunds was first revealed 15 years ago by the Treasury Inspector General for Tax Administration and it seems that little has been done to curb the crisis. This year more than a quarter of a million prisoners filed tax returns with the IRS, according to a newly released inspector general report. Nearly 50,000 claimed more than $130 million in refunds without bothering to report wage information.

Investigators found that 88% of the 287,918 returns filed by prisoners as of March 24, 2010 were not selected for screening by the IRS. While the tax agency pats itself on the back for catching nearly 250,000 fraudulent tax returns among the general population this year, investigators found that it seldom screens the returns of those most likely to commit fraud.

It shouldn’t take a government audit to figure out that imprisoned criminals should be at the top of the list. Regardless, previous inspector general probes have exposed the perpetual problem over the years and the IRS has failed to act. As far back as 2005 the Treasury watchdog ordered the IRS to stop the millions of dollars in fraudulent refunds paid to prisoners.

That probe determined that refund fraud committed by prisoners increased at an alarming rate of 318% from the previous year. Investigators also mentioned in the 2005 report that the prisoner tax refund problem was not a new one, but rather a well-documented one that had been reported as early as 1995 under a different inspector general.