Billions in ID Theft–Related Tax Fraud Undetected by IRS

Wednesday, January 16th, 2013 @ 9:11PM

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Identity theft is having a much larger impact on tax administration than the amount the Internal Revenue Service detects and prevents, according to a new report.

The report, by the Treasury Inspector General for Tax Administration , noted that the IRS reported that it detected 938,664 tax returns totaling $6.5 billion in fraud for processing year 2011 tax returns. Using the characteristics of confirmed identity theft, TIGTA identified approximately 1.5 million additional undetected tax returns with potentially fraudulent tax refunds totaling in excess of $5.2 billion. TIGTA estimates that the IRS could issue $21 billion in fraudulent tax refunds over the next five years.

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