Aug 9, 2012

Protect Your Neck: IRS may have refunded $5 billion or more to identity thieves

More depressing news brought to you by the Goodfellas at The IRS

The Internal Revenue Service may have delivered more than $5 billion in refund checks to identity thieves who filed fraudulent tax returns for 2011, Treasury Department investigators said on August 2nd. They estimate another $21 billion could make its way to ID thieves over the next five years.

The IRS is detecting far fewer fraudulent tax refund claims than actually occur, according to a government audit that warned the widespread problem could undermine public trust in the U.S. tax system.

Although the IRS detected about 940,000 fraudulent returns for last year claiming $6.5 billion in refunds, there were potentially another 1.5 million undetected cases of thieves seeking refunds after assuming the identity of a dead person, a child or someone who normally wouldn't file a tax return.

In one example, investigators found a single address in Lansing, Mich., that was used to file 2,137 tax returns. The IRS issued more than $3.3 million in refunds to that address. Three addresses in Florida, the center of the identity theft crisis, filed more than 500 returns totaling more than $1 million in refunds for each address.

In another troubling scenario, hundreds of refunds were deposited into the same bank account — a red flag for investigators searching for ID thieves who may be filing for refunds for multiple people. In one instance, the IRS deposited 590 refunds totaling more than $900,000 into one account.

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