Knowledge is protection when the IRS is involved. I'm Darrin Mish, a tax attorney in Tampa with 32 years of experience representing taxpayers nationwide. Here's what I want you to understand.<\/p>\n
The Treasury Inspector General for Tax Administration (TIGTA) has revealed some disturbing news. The number of tax fraud cases committed from prison doubled last year compared to 2010. A startling 173,000 fraudulent tax returns from prison inmates were filed last year, many of which contained stolen identities and other false information in order to steal tax refunds. The IRS managed to prevent inmates from illegally claiming $2.5 billion in tax refunds in the 2012 tax year. Two of these prisoners claimed about $1.1 billion out of that $1.5 billion in refunds. Imagine what other prisoners could have gotten away with. The $2.5 billion could be just the tip of the iceberg.<\/p>\n
The TIGTA report gave scarce details of personal information and none on how those two prisoners almost got away with siphoning out the $1.1 billion. Under the law, personal tax information cannot be revealed publicly unless the person has been charged with a tax crime.
\nThe IRS has learned from experience how inmates (or anyone else for that matter) game the system and gets away with other people\u2019s tax refunds fraudulently. These cheats find other taxpayers\u2019 personal identities and Social Security numbers from places that have such lists like hospitals, schools, or even morgues. If these are out of reach, there is always an abundance of personal information from the prisons themselves, so inmates can use fellow inmates\u2019 details to submit false income tax refund claims. There are some prisoners who use their own access to computers to file tax returns online. Then they will apply for e-transfer of the refunds into the bank accounts of friends on the outside.<\/p>\n
Another tactic is to file a tax refund claim as a former employee of a bankrupt company claiming that their company did not send them a W-2 form because they filed for bankruptcy. In an audit conducted in 2010, the TIGTA\u2019s office found that nearly 50,000 prison inmates claimed more than $130 million in tax refunds without providing any wage information to the IRS.<\/a> That year also, the TIGTA discovered that nearly 1,300 inmates had improperly received more than $9 million in homebuyer tax credits while in prison.<\/p>\n In a related case, Carmen Olga Real, a manager of a tax service franchise in York, who was charged in connection with tax fraud in June 2012. Real was charged with submitting 29 fraudulent tax returns with approximately $140,065 in false claims for a tax loss of $123,433. But in light of the above, even prison may not prevent Real from committing the crime again.<\/p>\n