IRS Receiving False Tax Returns from Prisons

Last updated on January 21, 2013

The IRS gets fraudulent tax returns from prison inmates every year, and it’s not in the hundreds, but thousands. In 2012, the IRS spotted more than 173,000 fraudulent tax returns from prison inmates. That number has doubled in the last two years. A report released by the US Treasury Department’s Inspector General for tax administration says that the IRS is making efforts to curb tax refund fraud, but there is still a lot of work to be done. Considering there were around 1,300 prison inmates receiving more than $9 million in false home-buyer tax credits in 2010, that is an understatement.

Even though the IRS stopped prison inmates from illegally claiming $2.5 billion in tax refunds in 2012, there is no telling how many and how much was not identified by the IRS, and that is the most worrying fact of them all.

Prisoners use the identity of fellow inmates and the obituaries of the recently deceased to file fraudulent tax returns and claim huge tax returns.

E-filing has made it easier for tax frauds to file false tax returns online. Through e-filing, prison inmates deposit refunds in their bank accounts or those of their family and/or friends.

“Most taxpayers find e-filing to be quick and easy. Unfortunately, some bad guys have also found it a quick and easy way to commit fraud,” Karen Kraushaar, spokeswoman for the IG said. “To the IRS’s credit, our report found that they are doing a much better job of stopping such fraudsters in their tracks. But more needs to be done.”