According to the Internal Revenue Service, the number of fraudulent claims for federal income tax refunds has increase fourfold over the past two years. In response, the IRS is now introducing new efforts to fight against fraud, including new screening procedures designed to flag questionable returns and refunds.
Tax refund fraud occurs when somebody files an income tax return claiming a refund they have not earned. It is hoped that the new efforts will significantly decrease the amount of refund fraud.
In addition to new screening procedures, the IRS will be implementing new mechanisms to make it more difficult to file tax returns using identities of dead persons or persons who wouldn’t be expected to file a tax return.
The amount of fraudulent claims has certainly risen drastically in the last couple years. This year, the IRS estimated that around 2 million returns were fraudulent. In 2009, there was an estimated 472,000 fraudulent returns. The increase may, in part, be due to the agencies increased ability to detect such fraud.
The increase in refund fraud is connected to overall increases in identify theft and an increase in the number of tax credits which generate refunds. Another factor is the agency’s practice of issuing refunds as quickly as possible.
In addition to implementing new anti-fraud measures, the IRS is also increasing its focus on assisting taxpayers whose identity has been used to obtain a fraudulent refund.
Hopefully the new efforts to crack down on refund fraud will implemented with discretion and fairness.
Source: nola.com, “IRS steps up efforts to fight fraudulent claims for tax refunds,” Kimberly Quillen, December 15, 2011.