Just hours after being force to admit that they were hacked (by Russians apparently) [8], an inspector general's report shows that The IRS [9]has rather remarkably continued to pay refunds on hundreds of thousands of fraudulent tax returns in recent years, and sent dozens of checks to the same addresses, including in Eastern Europe and elsewhere. While some progress has been made, $2.3 billion of real US taxpayer's money was wrongfully refunded to fake US taxpayers... but with this new cyber-attack, we suspect that number will soar.
The report by the Treasury Inspector General for Tax Administration [10] shows the Internal Revenue Service continued to pay refunds on hundreds of thousands of fraudulent tax returns in recent years, and sent dozens of checks to the same addresses, including in Eastern Europe and elsewhere. As The Wall Street Journal reports [9],
The new IG report says the IRS took steps for the 2013 filing season that resulted in “increased detection and prevention of identity theft tax returns.” But it said the agency continued to be hampered by several factors, including its inability to look at employer income data during the early weeks of the annual filing season.
The IG found that the IRS missed almost 800,000 potentially fraudulent tax returns.
In response, the IRS said it disputed some of the IG’s methodology. It thinks more than half of the nearly 800,000 returns identified by the IG should not be considered potentially fraudulent.
“Much more work remains, but it’s important to note that our actions have led to an increasing number of fraudulent returns being detected and stopped — despite challenging budgets in recent years,” the IRS said in a statement.
The IG also found “multiple tax returns with the same addresses and/or bank accounts” that the IRS computer filters didn’t catch. An analysis shows that of the top 10 addresses where the IRS sent multiple fraudulent refunds, three were in Bulgaria, one in Ireland and one in Lithuania. Three others were in Florida. Hundreds of refunds went to some of the addresses, and hundreds also went to the same bank accounts.
The IRS said in response that it recently has put a limit of three on the number of direct deposit refunds to a single financial account or pre-paid debit card. It also has been working to limit the number of refunds going to the same physical address.
What kind of person is filing fraudluent returns?
[11]
Where are the fraudulent refunds going?
[12]
On the bright side, the fraud is declining...
The IRS made significant progress in blocking phony tax returns in 2013. The total of potentially fraudulent refunds fell to about $2.3 billion for tax year 2012, from about $5.2 billion in tax year 2010, the report says.
[13]
But we suspect that given the massive cyberattack this week, the numbers will soar once again.
