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Tax Scammers Get Away With $5.2 Billion in 2013

Posted by McDonald & Osborne Posted on Oct 14 2015

While the IRS was able to detect and prevent $24.2 billion in fraudulent identity theft refunds from being made in 2013, a recent Government Accountability Office (GAO) report estimates that scammers where able to get away with $5.2 billion.

This is how it works – fraudsters buy or collect a list of stolen identities including names and social security numbers, go online, and file a fraudulent return in your name before you do. They then direct the refunds to be sent to their home address, bank account or a prepaid debit card that can quickly be used and discarded.

In a 60 Minutes report found here , former tax scammer Corey Williams stated ” I could wake up in the comfort of my own home, and just get on a laptop, do about 15 returns a day. Fifteen times $3,000 a return, that’s $45,000 a day while wearing boxers and a t-shirt”. Williams went on to say the IRS sent him his fraudulent refunds about 40% of the time, and it only took about seven days to receive the funds.

In its report mentioned above, the GAO suggests earlier matching of employer-reported wage information to the taxpayers’ tax returns. As it currently stands, the IRS does not match employer-reported W-2 data to tax returns until July, long after most returns (legit and fraudulent) have already been filed. Further, the GAO suggests that IRS auditors hold refunds until completing all compliance checks. But under federal law, the IRS is required to send out refund checks within six weeks. Facing budget and personnel constraints , this is hardly enough time for IRS agents to verify required documentation.

Stephen Osborne, CPA
Certified Public Accountant
sosborne@mo-cpa.com

Photo Credit: BigStockPhoto.com