Judicial Watch • IRS Sits By As Inmates Collect Fraudulent Tax Refunds

IRS Sits By As Inmates Collect Fraudulent Tax Refunds

IRS Sits By As Inmates Collect Fraudulent Tax Refunds

MARCH 22, 2011

Nearly a year after Congress passed a law to stop incarcerated criminals from fraudulently receiving millions of dollars in tax returns, the Internal Revenue Service (IRS) hasn’t bothered creating a system to catch the offenders.For more than a decade, government investigators have exposed an epidemic of prison inmates illegally receiving tens of millions of dollars in tax refunds. Last year alone, more than a quarter of a million prisoners filed tax returns with the IRS and nearly 50,000 claimed more than $130 million in refunds without bothering to report wage information, according to the Treasury Inspector General.To tackle the problem, last summer Congress expanded a 2008 law (Inmate Tax Fraud Prevention Act) aimed at federal prisoners to include those in state facilities, where the swindling is also pervasive. The measure gives the IRS authority to disclose information on inmates who file a false tax return to the federal and state agencies that run prisons.More than eight months later the IRS has yet to reach an information-sharing agreement that will help state prison officials identify those who file fake tax returns, according to a U.S. Senator from Florida, the state with the highest number of incarcerated tax scofflaws.Nearly 20% of the all the fraudulent tax refunds received by prisoners nationwide go to Florida, according to the Treasury Inspector General. In 2009 around 9,000 incarcerated criminals in the Sunshine State filed fraudulent tax returns by using basic forms to claim phony credits, usually with no supporting documents. Many Americans may wonder why the feds aren’t being more aggressive in combating the crisis which annually cheats the government out of millions.Florida Senator Bill Nelson is wondering the same thing. In a letter to IRS Commissioner Douglas Shulman, the veteran Democratic lawmaker urges the agency to quickly reach an agreement with the state’s department of corrections to facilitate the sharing of inmate tax information. That way they can begin identifying and take action against those who file fraudulent returns.The request seems simple enough. After all, government audits have long 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 year a probe determined that refund fraud committed by prisoners increased at an alarming rate of 318% from the previous year and that the crisis had been well-documented for a decade.

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