Smart TaxesSmart Taxes

Pact: No more bogus tax refunds for inmates

Agreement between the IRS and federal prisons seeks to end scam in which prisoners filed fake tax returns to collect refunds.

By Teresa Mears Feb 2, 2011 5:33PM

This article is by Michael Gormley of The Associated Press.


A new agreement aims to stop federal prisoners from filing for and collecting millions of dollars in bogus tax refunds from their cells.


Pressure from U.S. senators in New York, Ohio, Minnesota and Florida led to an agreement signed Wednesday between the Internal Revenue Service and the federal Bureau of Prisons to break down bureaucratic and regulatory barriers to end the practice. The memorandum of understanding struck between the two agencies overcomes legal obstacles that hindered their own efforts and paves the way for states to make similar agreements that apply to their prisons.


"The impasse needed to end, and today it's over," Sen. Charles Schumer of New York said, adding that the agencies responded quickly. "This agreement means that prisoners will no longer be able to bilk taxpayers out of millions of dollars."


Sen. Amy Klobuchar of Minnesota said the agreement effectively cuts through unnecessary red tape to "stop felons from scamming the system."


"It's shocking that inmates are ripping off the taxpayers right under the government's nose," said Sen. Bill Nelson of Florida.


Sen. Sherrod Brown of Ohio said the case shows "government agencies need to work together to prevent tax fraud wherever it occurs, but especially when we're being bilked from behind bars."


The senators pushed the agencies to cooperate after a federal audit showed the practice continued, despite a 2008 law aimed at stopping it.


The Bureau of Prisons and the IRS, however, had already been cracking down on the scheme and made several arrests and recoveries of refunds.


But even though the 2008 measure gave the IRS the authority to turn over tax data to prison officials, there was a glitch in carrying out the law. While the IRS could flag suspicious behavior, the Bureau of Prisons felt it needed to share the information with the Justice Department before taking action against prisoners, in the event the prisoners sued.


But the IRS, under tax law, felt it couldn't share tax information with prison officials if they would share it with any entity outside the bureau, including the Justice Department.


According to the IRS, the number of bogus tax returns filed by federal and state prisoners doubled in five years to 44,944 as of 2009. The amount of fraudulent claims during that time rose to $295 million, up from $68 million five years before.


Prisoners nationwide have used their own names or the names of friends and associates to submit the false claims.


The cases included an inmate in an upstate New York prison who used the names and Social Security numbers of others to file 21 tax returns claiming refunds worth more than $15,000. The prisoner filled out the returns in prison and had visitors submit them.


Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


More from MSN Money:




Feb 3, 2011 1:42AM
get a kleenex and wipe your nose. always a dem / rep comparison. its fraud and who cares who gets name recog. let just stop it. right? 
Feb 3, 2011 9:38AM

At first I was amazed that the inmate's scam has gone on for as long as it has and they continue to scam through other means....but then I remembered.... that our government is incompetent, bloated, and too busy to protect the MILLIONS of dollars going out the door to scammers like this.  They just keep putting their efforts into taxing the hell outta me!  Never reelect anyone!

Feb 3, 2011 7:45AM
I work in a state prison.  Inmate's scam for welfare benefit's, VA benefits & every other benefit you could imagine!  One inmate scammed the federal govnt out of thousands of dollars before they caught on & it lasted several years.  If the inmate has an inmate # & address duh! Aren't computers wonderful?  They don't pick up on this like an actual person would.
Feb 3, 2011 3:01AM
Actually there were four senators mentioned and all were Dems.  Apparently Republican senators found this issue not worthy of their time.
Feb 3, 2011 10:47AM

The worst part of this is, it has been going on for years. We are stupid! It also goes to show you that our government is unable to manage its self. Where do these idiots come from. How do they get elected? Why is it, a politician can say things that he knows he will not be able to complete while in office and yet he is not classified as a liar? What makes it even better is the fact he is reelected again.

I had a scam try and go through my website, I knew it was a scam so I contacted the FBI. They told me since it was not a crime they couldn't do anything until a crime was committed. So, if I sent them $25,000 worth of product they would then act on it. And I sit with a $25,000 loss. I have had 3 of these and they will not do anything.

My wife signed up to be a secret shopper and the guy said he would send her an assignment. He did but said she needed to cash the check and use it for the assignment and wire the rest ofthe money back to her. The check was for $3500 and it was a simple dinner that she was to go to. So now I step in and do a little research becauseknowing the scams out there this fell right into on. I contacted the FBI, they said I needed to contact the Internet Crimes. Have I heard anything from them yet? No. So you wonder why these people operate. I thought about going out to washington where this guy lived and have a talk with him,

Feb 3, 2011 9:41AM

Wonder why it took this long?  When will people realize that anger doesn't bring about change.  Anger with action does.

Feb 3, 2011 10:24AM
The question is why did it continue to go on for so long? Where were the prison management (warden, etc...). What is sad is society does not care if individuals get ripped off nor the government. We have become a "What is yours is mine and what is mine is mine" attitude today. We will be our own down fall!
Feb 6, 2011 2:05PM
If they would keep these scum behind the bars in their cells 24hrs a day, where they belong, this wouldn't happen. Might even work as a deterent for going to jail in the first place.
Feb 4, 2011 12:40PM
Feb 3, 2011 12:54AM
Strange, this article saw fit to only mention Schumer of new york who is a liberal joke and one from minnesota who I bet is a democrat as well; Notice the Florida senator got no name recognition; wonder if that's because it was a republican.
Always slanted msn.

Feb 3, 2011 3:33AM
No surprise that Republicants would resist yet another power grab by the Federal government - ANY economic regulation is Socialist, from prohibiting insider trading to convicts getting tax refunds. You all should be proud though, that filing a tax return will be impossible REGARDLESS what crime you committed. Couple that with the largest inmate population in the Free World and the Tea Baggers should just stand up as one and scream NO!!! - are you being incarcerated for the crime, or to gain access to your wealth? Ask Donald Scott....

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.