I hear from people every week who think their tax problem is the end of the world. It usually isn't. I'm Darrin Mish. I've resolved over $100 million in tax debt for clients. Here's what you should know.
Tampa police Detective Sal Augeri tells of how a prepaid debit card issuing company in Tampa, Florida sent back several tax refund checks to the IRS because they suspected the refunds were obtained fraudulently. But the IRS sent the money anyway, in the form of government checks. Police officers like Detective Augeri who are part of a task force set up to stem the rise of fraudulent refund checks have been increasingly frustrated at the action of the IRS.
This debit card incident is not the only such case of suspected fraud. But it epitomizes the inability of the IRS to stop the flow of hundreds of millions of dollars in fraudulent tax refunds, according to some police personnel. The stolen taxpayer money goes into the pockets of these Tampa tax cheats and funds their lifestyles of expensive cars, jewelry and illicit drugs.
Another party that has stopped cases of suspected fraudulent refunds amounting to about $100 million of late is the US Postal Service. This massive amount comes from a six-month period in Tampa alone, and yet the police chief said that it was merely the tip of the iceberg. This has been going on daily even though tax season has ended six months ago. According to Tampa Postal Inspector Doug Smith, the Postal Service stops about $1 million in refunds each week.
The police are getting increasingly frustrated at the IRS who appears to be less than cooperative. Already, the law prohibits the IRS from divulging personal tax details that would help the police in investigating fraud. Adding to that is the practice of the IRS to screen tax returns only after refund checks have been issued, by which time it is too late – the crooks have already spent the money. Police officers are also vexed by the seeming inability of the federal government to screen tax returns so the fraudulent refunds aren’t sent in the first place.
Usually, the tax cheats file phony tax returns using stolen Social Security numbers and other personal information and sometimes they even buy such information from willing sellers.
US Attorney Robert O’Neill chipped in to the debate when he said that local law enforcement doesn’t have the jurisdiction to investigate federal tax fraud, and the IRS doesn’t have the resources to go after all the criminals. O’Neill added that it is impossible for the justice system to handle all the cases of suspected fraud.
The problem is exacerbated by the fact that people want their tax returns fast. In fact, the IRS does screen for fraud before sending out refunds (for example by checking when returns are sent from prisons) but that screening is limited because of the demand for speedy returns.
The IRS made a statement that said it has “a robust screening process with measures in place to stop fraudulent returns, but as the IRS is getting better at stopping more of these cases, we’re also unfortunately seeing an increase in identity theft, including more complex schemes. We continually refine and update our filters and screening methods, while maintaining a balance that gets tax refunds to the rightful taxpayers as soon as we can.”
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