Tax Defense Network: Tax Refund Fraud

Millions of fraudulent tax returns are filed annually. A single fraudster files hundreds of fake returns using stolen identities. Tax Defense Network shares some fraud stories to reveal the nature and size of tax refund fraud.

Tax Defense Network: Refund Fraud in Miami

Of all cities in the U.S., Miami has the highest number of tax refund fraud. According to the Federal Trade Commission (FTC), Florida had the highest rate of identity theft in the country in 2011. The rate of identity theft in Miami has reached near epidemic proportions. Florida’s rate of 178 complaints per 100,000 residents is the highest in the United States. However, Miami outdoes it by 324.1 complaints per 100,000 residents.

A report by the U.S. Treasury Inspector General for Tax Administration (TIGTA) published in 2012 identified 74,496 potentially fraudulent returns filed in Miami resulting in more than $280 million in bogus refunds.

The worst news is that most tax refund fraud remains undetected. According to the TIGTA, “tax returns using characteristics of identity theft confirmed by the IRS identified approximately 1.5 million undetected tax returns with potentially fraudulent tax refunds totaling in excess of $5.2 billion.”

Tax Defense Network: Conducting Refund Fraud from Prison

Carrying out tax refund fraud is so easy that even prison inmates are doing it. Last week, Michael William Joseph III pleaded guilty before a U.S. District Court to filing fraudulent tax returns. During his stay in prison from 2006 to 2008, he claimed tax refunds worth $179,000 using the identities of fellow prisoners. The IRS paid out around $51,000, though some of that money was recovered from his bank account and some from his mother’s home in Tampa.

The worrying trend is that criminals who commit violent crimes are using the tax money to fund other illegal activities. Gang members, narcotics traffickers, and petty criminals believe tax refund fraud to be an easy crime, as it gives them a greater chance of staying anonymous.

Tax Defense Network: Tax Refund Fraud Reaches the Graves

Tax frauds are using the recently deceased, too. Federal investigators are now targeting those who are filing false tax returns using the identities of the recently dead. The arrest of a former St. Louis-area resident, Tania Nichole Henderson, revealed that she tried to steal almost $1.5 million in fraudulent tax refunds.

Seeing an increase in false filings using the identity of the dead, the IRS introduced the new rule where the IRS form for getting tax refunds for the recently dead must be accompanied with details about the person filing it.

Tax refund fraud is the greatest challenge faced by the IRS today. With multiple methods of acquiring information of taxpayers, including online resources, SMS, phone calls and post, taxpayers need to be careful in what information they share and with whom. It would need the combined efforts of law enforcement agencies, the IRS and taxpayers to bring down tax refund fraud.

From the Author: Tax Resolution Legal Team

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