A report released today by a government investigator found that about 50,000 prison inmates claimed more than $130 million in tax refunds in 2010. These inmates did not provide any wage information to the IRS, but were still able to claim millions in refunds. Are these legitimate refunds, or fraud? The IRS won’t say yet, but you can be sure an investigation will be conducted.
The Treasury Inspector General for Tax Administration stops short of saying the refunds were fraudulently claimed. It does, however, say the Internal Revenue Service should investigate further.
The report is the latest in a series of audits looking at prison inmates claiming tax credits and other government payments. It notes that the IRS identified nearly 250,000 fraudulent tax returns during the 2010 filing season — a 50 percent increase over 2009 — preventing $1.48 billion in fraudulent refunds.
"While the IRS is identifying larger numbers of fraudulent returns, improvements must be made to its screening processes to ensure that returns filed by prisoners get adequate scrutiny," said J. Russell George, the Treasury inspector general for tax administration. "Expanded and expedited access to wage and withholding information would significantly increase the IRS's ability to verify information reported on a tax return when processed, and prevent fraud."
The IRS issued a statement saying the agency takes refund fraud seriously and aggressively fights it.
"The IRS is very successful at detecting and stopping incorrect refunds, including criminal refund fraud, and overall prevents 98 percent of questionable claims from being issued," the statement said.