Is the IRS's tax fraud enforcement improving?
With some high-profile tax fraud arrests being made in early 2015, one wonders if the IRS and authorities are on to the identity theft tax fraud rings. The recent arrest of Alabama's Talashia Hinton brought down what authorities described as a $7.5 million fraud ring.
Identity theft and tax refund fraud not only costs the federal government billions of dollars a year, it causes undue stress and hardship to its innocent victims. Hinton was alleged to have filed more than 3,000 false tax returns over several years. The use of prepaid debit cards seemed to be her deposit option of choice.
The Hinton case was just one of many defendants who have been charged with - and convicted for - huge amounts of theft. A defendant from Anchorage, Alaska, Maximo Amparo-Vazquez, was involved in a $19 million dollar tax fraud scheme and was sentenced to 84 months in prison. The conspirators in the Amparo-Vazquez income tax fraud scheme obtained the stolen identities of more than 2,600 individuals, mostly identities stolen from residents of Puerto Rico.
The IRS website publishes a long list of prosecuted tax fraud perpetrators. Click here to view some recent tax fraud schemes.
The big question is: how can the IRS stop most of the fraud?
The IRS has already added direct deposit limits to combat tax refund fraud. The agency is limiting the amount of deposits that can be electronically deposited on pre-paid debit cards. The IRS walks a fine line with controls and being able to meet the needs of the unbanked. The IRS could also look at delaying the start of tax season, which is when most of the fraud takes place. But that is as much of a political issue as IRS policy.
The IRS has already taken away the ability of tax professionals to deposit refunds in their own bank accounts.
Ideas to stop the fraud:
The IRS could speed up or delay the start of tax season and require all W2s to be filed electronically. They could then match these income reports to stop the fraud in its tracks.
Congress could also eliminate refundable credits, like the EITC, through which more than 13 billion dollars in fraud takes place. However, we know that, politically, that is not likely to happen. If you think you are a victim of tax refund theft, you can call the IRS Identity Protection Specialized Unit at 1-800-908-4490 for guidance. For a more comprehensive resource, check out the following efile.com page.