With mortgage fraud and Medicare fraud reportedly under control, the federal government once again has its hands full. The new fraud on the street involves identity theft and refund checks being stolen from the Internal Revenue Service (IRS). According to reports, the IRS has already lost an estimated $5 billion to individuals committing identity theft with expectations that another $21 billion may be lost over the next 5 years. While losses in no way compare to losses accrued through mortgage and Medicare fraud, the federal government is concerned. As the IRS begins to uncover the frauds that have occurred, the number of indictments involving stolen tax returns and identity theft will escalate. Criminal defense lawyers in Miami will be representing more and more clients involved with these offenses as the federal government figures out how to detect them.
The IRS is having difficulty detecting fraudulent tax refunds. According to the IRS, they discovered approximately 940,000 fraudulent returns last year preventing losses exceeding $6.5 billion. However, the IRS also reported that there could be as many as another 1.5 million fraudulent returns that went undetected. The IRS explained that the reason the fraudulent returns went undetected is because individuals are filing refunds on the behalf of deceased individuals, children and others who would not file a tax return. The IRS have specific examples of tax fraud and identity theft that they have found particularly disconcerting. For example, the IRS found that one address in Michigan was used to file 2,137 returns which in turn yielded $3.3 million in refunded money. As ususal, Florida made the list. Three addresses in Florida filed in excess of 500 returns which caused the IRS to return $1 million to each locaion.
The IRS claimed that they have difficulty in verifying returns because they attempt to process and return funds as quickly as possible. Individuals can file returns before employers and financial institutions have to submit withholding and income documents by the end of March. In sum, the IRS is offering refunds before they can verify whether the returns are being filed truthfully. The IRS made a point of saying that at present they are able to detect the majority of the identity theft tax fraud, but they are concerned of the exponential growth of the problem. The agency is actively pursuing those who commit fraud with increased assets and man-hours. The IRS along with inspector general has asked Congress to give them access to other resources that will help them more effectively fight the fraud.
In an effort to fight identity theft and tax fraud, the IRS has already begun to implement new measures. They have implemented screening filters which will not allow for refunds to be returned until a person's identity can be verified by the agency. According to the IRS, the new system has prevented $1.5 million in fraudulent returns. Another safeguard is a program that identifies social security numbers of deceased individuals. Senator Bill Nelson has approved a bill that will provide increased protections for social security numbers. Persons previously affected by identity theft will be given a special identification number to deter repeat offenses. Another billed passed by the House of Representatives is seeking to enhance the criminal penalties for identity theft and tax fraud.
IRS May Have Lost Billions to Identity Theft, Huffington Post.com, August 2, 2012.