IRS refunded $12 million to dead people in scam

According to the government's lawsuit, the phony claims -- apparently processed by a single tax preparer -- were spread over some 300 accounts in several different banks.

By MSN Money Partner May 6, 2011 11:28AM

This post comes from Janet Novack at partner site Forbes.com.

 

Forbes.com on MSN MoneyOver the course of a year, the Internal Revenue Service processed and paid out $12.1 million in fraudulent tax refund claims submitted using the stolen names and Social Security numbers of 5,108 dead people.

 

Incredibly, the claims were all processed under the "Electronic Filing Identification Number" assigned to just one tax preparer, without, apparently, being blocked by any of the computerized screening programs used by the IRS to catch refund fraud.

 

That surprising disclosure is contained in a "Complaint for Forfeiture" lawsuit the government filed late last month in the Southern District of Florida. The suit seeks to keep $851,832 federal agents seized in March from 10 Bank of America accounts and $760,035 they seized from three JP Morgan Chase Bank accounts -- all the cash allegedly proceeds of the post-mortem identity theft scam.

 

The phony refund claims, all for calendar year 2009, were filed in the names of people who had died in 2009 or 2010. The fraud may well have been facilitated by the fact that the Social Security Death Index -- a  database of all deaths reported to the Social Security Administration since 1962 -- is publicly available on the web through such sites as Ancestry.com and geneaologybank.com.  A fraudster can, for example, search for the names of everyone who died in certain months and then access information for each individual, including his or her Social Security number, birth date, death date, and the zip code for the individual’s last known residence. Post continues after video.

According to the government's complaint, the tax preparer Electronic Filing Identification Number used in the massive scam was assigned to a Florida man who told federal agents he was paid $1,000 to apply for it, but never prepared any returns or used the number.  Some of the refunds were sent to an account at BankAtlantic opened by a different Florida man. Federal agents have traced proceeds of the dead taxpayer refund scam to 300 accounts spread over nine different banks, the complaint says. It is unclear from public filings just how much of the $12.1 million the government has recovered, but apparently the largest recovered chunks were in the Bank of America and JP Morgan Chase accounts.

So far, there have been no criminal charges brought in the case. The Assistant U.S. Attorney who filed the forfeiture case declined to comment on the status of any criminal investigation or other aspects of the case.

 

The Social Security Administration sends weekly death report updates to the IRS. So why would the IRS pay any refunds at all to dead people? A spokeswoman for the IRS, citing taxpayer privacy laws, declined to comment on any aspects of this case, but noted that a 1040 for the year of or before a taxpayer's death is often due and filed by a surviving spouse or an estate. 

 

That raises the possibility that surviving relatives of the dead identity theft victims may have encountered difficulties when filing last returns for their loved ones; if the identity thief filed a 1040 under the Social Security number first, the second, legitimate refund claim would typically be frozen while the IRS investigated.

 

In a formal statement e-mailed to Forbes, the IRS said it has made preventing identity theft a top priority, but  is still "seeing an increase in identity theft cases, including more complex and sophisticated schemes."

 

Here’s the full IRS statement:

Preventing identity theft is a top priority at the IRS, and we have committed significant resources to addressing and resolving cases of taxpayer identity theft. The IRS understands that identity theft issues can be very frustrating and complicated for people. Tax-related identity theft cases can be extremely complex, and the IRS is committed to working with taxpayers who have become victims. The IRS processes more than 142 million tax returns every year, and issues over 109 million refunds totaling over $328 billion and has a robust screening process with measures in place to stop fraudulent returns  Unfortunately we are seeing an increase in identity theft cases, including more complex and sophisticated schemes. Just this year alone, the IRS has stopped nearly 117,000 identity theft returns and protected more than $582 million from getting into the wrong hands. The IRS not only stops the vast majority of fraudulent refund claims, but also investigates and works with the Department of Justice to criminally prosecute ID theft cases against scam artists.

More on Forbes.com and MSN Money:

VIDEO ON MSN MONEY

43Comments
May 6, 2011 3:08PM
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Oh please, lets step back through the looking glass into the real world.  In 2010, IRS issued $467 billion in tax refunds.  $12 million is less than one 1/1000 of 1% of that.

 

Do you really think that any private company that disbirses large amount of cash like an insurance company really does any better than that?   

 

If you do, please post your contact info.   I have a large tract of land I'd like to sell you  -- its conveniently located just off the coast of Florida.

May 6, 2011 1:36PM
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The problem I see with a flat tax is that those who make $1 Milliion annually would pay $400,000 in taxes, leaving them a whopping $600,000 to live on.  While someone who makes $20,000 annually would pay $8,000, leaving them only $12,000 to live on.
May 6, 2011 2:48PM
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"The problem I see with a flat tax is that those who make $1 Milliion annually would pay $400,000 in taxes, leaving them a whopping $600,000 to live on.  While someone who makes $20,000 annually would pay $8,000, leaving them only $12,000 to live on."  posted by mominky

 

Spoken like a true socialist. Angry  Oh, and that 40% rate.....pretty funny!  Eye-rolling

May 6, 2011 2:13PM
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IRS is Executive branch agency (well they all are). That means it all Obamas fault.
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   The US Government is self-perpetuating: retired-on-the-J-O-B--until they do not have to even think of stopping in to pick up their paycheck---

  What is the point--bankruptcy USA coming soon--a guarantee.

  Not one agency can do anything--GULF oil spill;, Katrina, illegals rape and rob then run to the nearest "Sanctuary City" doing what they dam well please!

  Meanwhile we foot the bill for the UN IMF, AID, OPIC on and on: our gov even gives I mean g-i-v-e-s Communist China $13 Billion annual: that has nothing to do with the interest upon interest we pay which we will work til we die--or are fully owned by CC first!

  Illegals enter--demand all THEFT from our ancestry past-present-future: Illinois now has voted in The Dream Act!

  Who will pay: the dead US Military or their families of the diminishing working US Citizens of generations as taxpayers?

  Over 50% pay nothing now: just keep heathen breeding as those do who enter the USA illegally then just in time to drop a future heathen breeder via sperm donor exponentials from womb to tomb an endless supply from overpopulated Mexcio--hemoraging PLAGUE.

  Studies re: how much Chinese in China that is whores drink while on the job.

 Argentina study about homosexuals etc.

  We give them cash: we receive IOU's interest upon interest while taxes aren't even in the US Constitution: Tea Party in history...

  Our government even gives CUBA funds billions!

  Everyone except the person who commutes, everyday until they drop dead--my family or are slaughtered or BE HEADED in the elites wars on foreign soil while we are forced to endure the invasion due to Open Borders The Race=666=LaRaza ills on and on being rewarded for over 50 years--as planned by the Communist since The Race filed for its organization.

  EVIL vs One Nation Under GOD

 Souls are Bought and PAID in Full by the DEVIL starting at the White House with the 37 Un Con stitutional Socialist CZARS who created the housing debacle now doing Cap N Trade Banks giving away more or rather printing paper which we the people receive IOU's!

  No drilling here--just give George Sorros $2 Billion for BRAZIL a communist nation: now occupied and oil controlled by Communist China.

  Russia, which is communist prints daily updates as to how the USA is falling apart.

  Many enemies but none worse than the prior and current administrations and their dicatorial US Supremezzes and Department who provide you with anything you will believe--just like HOLLYWOOD movies!

May 6, 2011 3:04PM
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Medicare admits to at least $75,000,000,000 dollars in Medicare fraud each year with about half known to go to illegal immigrants working out of Miami, Florida.  Our Federal government is inept and can not manage the system we have now and Obama wants to add more to the plate encumbered with even more complicated rules and new taxes.  Most of the Obama money will go to illegal aliens who are already robbing our country blind.  Socialism does not work and it has been proven in Cuba, Russia and most of the European countries.  We need a new leader and reduced government just as our founding fathers called for.  They make most of todays politicians look like useless idiots.
May 6, 2011 4:35PM
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you repugnitards are such dullards. the irs doesn't ENFORCE healthcare, i don't care what those blow holes at the BlameStream Media tell you zombies (BlameStream Media, that's Faux Snooze = fox news LOLOLOLOLOL for those of you who can actually read)!
May 6, 2011 2:26PM
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It could be worse let the private sector do it and the fraudulent refunds will be sent to the wealthy leaders and or family/friends of the company. The wealthy hide their income overseas, in trusts and other tax avoidance methods working people can't afford. Then they complain when they drive wages down so low that working american's income tax liability is near zero. However, since working people pay sales, property, motor vehicle and many other taxes they are paying taxes and a higher percentage of their actual income then a wealthy person does who has access to tax avoidance schemes.
May 6, 2011 3:55PM
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Yup, and they, the IRS, are going to enforce oblowhole care? Are we in a world of **** or what!!!!
May 6, 2011 2:20PM
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I think a value added tax would be the fairest way to replace the current federal system.

Yes a federal sales tax on everything except food bought in grocery stores, and rental housing. This would apply to everyone.

No exemptions for businesses unless the item is for resale. So business to business sales for resale would not be taxed, but

For capital improvements, and items normally written off as operating expenses would see the tax.

No corporate loop holes...No income tax. In fact no tax benefit to incorporate, just the non-tax reasons to do so..

 

So if a family would pay no tax to rent, but a sales tax would be added to a house. Certain items would garner a higher tax, just as they do now. You know the ciggys, and alcohol would have a higher percentage rate than say a house....

 

Baby clothes would be taxed at a lower rate than Adult clothing. Used items would be taxed at a lower rate than new..

 

Sure it would be a complex system to inagurate but with computers in every retail outlet it would be nearly automatic...

 

A smoother cash flow to the fed would result, the IRS would disappear and Aprill 14th would be nothing more than a bad memory.......

 

......AND IF YOU VOTED  THUMBS DOWN ON THIS COMMENT THEN YOU MUST LOVE THE WAY YOU ARE CURRENTLY BEING TREATED BY THE IRS AND ARE IN THE GROUP THAT PAYS LITTLE OR NO INCOME TAX...

 

ABOLISH THE IRS...A FLAT TAX IS NOT THE ANSWER SPEND IT GET TAXED ON IT. SAVE IT OR INVEST IT AND GET THE ADVANTAGE OF NOT BEING PENALIZED FOR SAVING OR INVESTING...

 

WISE UP...

May 6, 2011 1:22PM
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uncle mike, the only problem with a flat tax (which I would like too), is that 40+ % of people who file fed taxes have no tax liability.  What politician is gong to propose that change when the all those people will say no ?

 

I think it's time....I read the article an my impression was the IRS did a good job of catching the person. They were 2009 taxes, so filled in 2010.  My belief is the IRS processes most returns quickly (which people insist on), and the non math issues are investigated later (six months to a year or two).  But you could propose to the IRS they hold up sending out checks until they do all their checks and balances...your friends and family would thank you I am sure.

May 6, 2011 2:50PM
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what a bunch or incompent ****------  we have working there.whaielse have thry done they aren't telling us WHERE ARE ALL THE HIGH POWERED PROGRAMERS THEY SHOULD BE HELD ACCOUNTABLE.
May 6, 2011 2:57PM
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To all those who argue that the IRS should be audited, take heed:  It is audited and has been every year since 1992.  Since 2000, the opinion on its audited financial statements has been unqualified (clean) and there have been multiple material weaknesses in its internal controls, most notably, the controls over the security of its automated information systems (take note electronic filers!)

 

For more on this; see the website of the U.S. Government Accountability Office, report number GAO-11-142.

 

If people would read more and talk and write less, perhaps they would not overlook little things like this, for nearly 20 years running.

May 6, 2011 2:33PM
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I.R.S. and Al Queda, 2 names that bring terror to people. The first one wants to make your life a living h3ll, the other only wants to kill you.
May 6, 2011 12:44PM
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when they find out who was behind this ?they won't find a Catholic Priest
May 6, 2011 1:52PM
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And we should let the gov. be in charge of health care. Let alone banks, autos, stimulus bail outs give me a break..

May 6, 2011 12:48PM
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Another great job by the IRS "working" for the citizens... How long will it take to figure this all out? Also, any other instances of this? Wouldn't be surprised. The perp is probably sitting on a beach somewhere smiling. Thanks IRS for all you do. Someone produces ID's for dead people that you receive on regular basis and yet fail to catch on until its too late. Someone or some persons who are important better be getting fired or at least be sitting in the hot seat right now. Maybe if you weren't worried about harassing those people who file returns and are off by $.01 or so you could figure things out like this sooner. Another example of an inefficient, ineffective government agency. Now I have no issues with the IRS, and I understand what they have to do, what I'm tired of is the broken system that we have and stories like this that come up resulting in a further middle finger to the honest taxpayers. Hey IRS if you really care, take a stand against Congress and tell them it isn't working anymore, because FYI, its not! Again I say hello to Fair Tax good by to current system. Stories like this would be a thing of the past. It is time to make the change, now!
May 6, 2011 2:37PM
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The Govt. does NOT have a problem giving tax payer dollars (a lot) to scamming banks (thieves) and car companies (unions), so why should we care if the IRS (Govt.) gives dead people some money (a little)?

The U.S. Govt. has been screwing The People for many years, and until We revolt, they will continue to screw you and me 'til Kingdom come.
May 6, 2011 2:10PM
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Flat tax - 10% all income & cap. gains. No deductions. Exempt the first 40k.
make up to 40k - no tax. make 60k - pay 2k. make 1 million - pay 96k.
Just a thought.

May 6, 2011 1:54PM
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I heard one year that they tried to audit the IRS.  But when half the paper work was missing or screwed up. they could not  do it. If that was u or me , Oh Boy.
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