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Income tax fraud more widespread as a result of IRS quick return policy

On Behalf of | Mar 21, 2012 | Firm News, White Collar Crimes |

New IRS policies designed to facilitate fast online tax returns are reportedly causing an increase in tax fraud, according to law enforcement officials.

How are they doing it? First they obtain Social Security numbers and other personal information from hospitals, doctor’s offices, car dealerships and other places the information is kept. The information is then used to file an online return using the real taxpayer’s name and a phony income. The actual return, in most cases, is put on a debit card the offender has purchased, though Treasury checks have been issued in some cases.

According to police, the process itself is very simple and can be explained in a matter of minutes. The IRS’s allowance of debit cards for use in obtaining returns and its focus on getting the returns out quickly is apparently a major reason the fraud isn’t detected like it should be. IRS does not verify employer W-2s sent with returns until after the refund is issued.

The IRS defends its policy by explaining that not every taxpayer has a bank account, and the use of a third-party debit card is a legitimate way to receive a return.

In Florida, where the problem is reportedly to be particularly prevalent, police have been making busts in routine traffic stops. North Miami Beach and Tampa, in particular, have been hit hard by the fraud activity.

According to police in Tampa, criminals have scammed the IRS and taxpayers out of $450 million in tax return money. Last year, the IRS identified at least 582,000 taxpayers who were victims of identity theft. That number is over double what it was three years before.

Tax fraud is a serious offense, and can result in serious consequences if one is convicted. Possible offenses in the area of tax fraud include attempting to evade paying taxes, submitting false statements to the IRS, and willfully failing to file a return, supply information or pay on time. Convictions routinely result in imprisonment, fines and other costs.

Those facing these charges do well to consult an attorney.

Source: CNN, “IRS policies help fuel tax refund fraud, officials say,” Scott Zamost, Randi Kaye, March 2012.