Prisoner Tax Refund Fraud
Thursday, January 15th, 2015 @ 5:21PM
Treasury Inspector General for Tax Administration
Final Report issued on September 25, 2014
Highlights of Reference Number: 2014-40-091 to the Internal Revenue Service Commissioner for the Wage and Investment Division.
Delays Continue in Completing Agreements to Share Information With Prisons, and Reports to Congress Are Not Timely or Complete
IMPACT ON TAXPAYERS
Refund fraud associated with prisoner Social Security Numbers remains a significant problem for tax administration. The number of fraudulent tax returns filed using a prisoner’s Social Security Number that were identified by the IRS increased from more than 37,000 tax returns in Calendar Year 2007 to more than 137,000 tax returns in Calendar Year 2012. The refunds claimed on these tax returns increased from $166 million to $1 billion.
WHY TIGTA DID THE AUDIT
This audit was initiated because prior TIGTA reports identified concerns with the IRS’s efforts to identify and prevent prisoner tax fraud. The overall objective was to evaluate the effectiveness of the IRS’s corrective actions to identify and reduce prisoner fraud.
WHAT TIGTA FOUND
TIGTA found that the IRS has not yet shared fraudulent prisoner tax return information with Federal or State prison officials. TIGTA also found that the required annual prisoner fraud reports to Congress are not timely and that the reports do not address the extent to which prisoners may be filing fraudulent tax returns using a different individual’s SSN. TIGTA also followed up on a condition identified in a past review and found that IRS processes still do not ensure that all tax returns filed using a prisoner Social Security Number are assigned a prisoner indicator.