Investigators: IRS Lost $5.2B to ID Thieves in 2011

An audit conducted by the Treasury Inspector General for Tax Administration states that more than $5.2 billion in tax return checks were delivered to identity thieves in 2011 and $21 billion more could be lost in the next five years, according to a news report by The Associated Press.

Treasury officials warned that the IRS  is only unearthing a fraction of the fraudulent claims that take place. Although the  IRS discovered about 940,000 in fraudulent returns claiming $6.5 billion in refunds, there were potentially another 1.5 million cases that weren’t discovered, according to The Associated Press.

There have been reports of people filing fraudulent tax returns throughout the country, including here in Pelham.

"Undetected tax refund fraud results in significant unintended Federal outlays," the audit states. "The issuance of fraudulent tax refunds erodes the confidence in our Nation’s tax system and increases the burden on those taxpayers who make an honest effort to comply with our Nation’s tax laws.  Unscrupulous individuals are stealing identities at an alarming rate for use in submitting tax returns with false income and withholding documents to the IRS for the sole purpose of receiving a fraudulent tax refund." 

Thieves have found ways to exploit methods used by the IRS to expedite refunds such as direct deposits and pre-loaded debit cards. These methods allows crooks to work around the need to list physical addressed where checks can be mailed and provide photo identification in order to cash those checks.

Peggy Bogadi, commissioner of the IRS wage and investment division, called the Treasury Department’s claim that $21 billion in fraudulent returns could be issued during the next five years ‘significantly overstated.’

IRS officials said they have already stopped $12 billion frauds this years and have ramped up their fraud prevention efforts.

The original AP story can be found here on the Huffington Post. A copy of the audit can be found in the PDF file to the right of this story.