Currently, the most widespread tax scams are identity theft and ID phishing, the IRS concludes in its Dirty Dozen Tax Scams report. According to the report, issued August 2012, by the Office of the Inspector General, the IRS could lose $21 billion in fraudulent tax refunds in the next five years. The report also states the IRS is not using the information it has, or it could obtain to effectively control tax fraud activities.
Stealing financial and personal information from taxpayers, alive or deceased, to file thousands of inaccurate tax returns for large refunds is a plague the IRS fights against every year, but what they have achieved is a band-aid on the titanic.
Tax Defense Network: Shocking Tax Scam Figures
The ease with which tax scammers carry out identity theft can be determined by looking at some of the recently busted identity thefts. In a case of identity theft, scammers submitted as many as 2,137 fraudulent tax returns from a single address in Lansing, Michigan. Even more shocking is the fact that the IRS sent out more than $3.3 million to that address in refunds. Another case in Chicago has 765 returns filed from a single address as well.
Many times, tax scammers use the addresses of vacant houses on fraudulent tax returns. There have been cases of prisoners filing fraudulent tax returns from the prison. Even if the IRS detects fraudulent tax returns, it still is difficult to catch the frauds who file them.
Top Tax Scam Cities: Tax Defense Network Elaborates
Two cities in Florida, Tampa and Miami, are found to have the most cases of identity theft regarding taxes. Tax Defense Network, a tax resolution company based in Jacksonville, Florida has seen gigantic tax scams busted in Florida, including a $130 million tax fraud by drug dealers. Tampa, Fl alone had more than 88,000 potentially fraudulent tax returns filed with Miami coming in a close second with more than 74,000.
Top five U.S. states with most identity theft victims are:
This list is based on complaints made by victims of identity theft. However, many victims do not make a formal complaint. The problem of identity theft scams, after all, might be more acute than what these figures tell.
Tax Defense Network: Identity Theft Scam & the IRS
In its report, the Office of Inspector General reveals that the IRS identified about 1.5 million potentially fraudulent tax returns that flew under its radar in 2010. According to the report, potential fraud for 2010 exceeded $5.2 billion. These figures tell a lot about the IRS' efficiency in detecting tax fraud. Their lack of competence in detecting fraudulent tax returns leads to loss of billions of dollars to the Treasury each year. It is a loss for taxpayers and to the country.