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IRS reviewing 2 million returns for fraud

The federal government is ramping up its efforts to combat criminals who engage in identity theft to collect other people's tax refunds.

By MSN Money Partner Mar 30, 2012 6:07PM

This post is by Richard Rubin of


The Internal Revenue Service is reviewing almost 2 million tax returns for possible fraud, Deputy Commissioner Steve Miller told a U.S. Senate subcommittee recently.


With less than a month remaining in the tax-filing season, that number "approaches the total" of returns identified for review in 2011, Miller said. A primary cause of such fraud, he said, is identity theft.


"The IRS is confronted with the same challenges as every major financial institution in preventing and detecting identity theft," he said. "We cannot stop all identity theft. However, we are better than we were, and we will get better still."


Last year, the IRS prevented the issuance of $14 billion in fraudulent refunds, Miller said. This year the agency has added hundreds of employees to its anti-fraud efforts and has implemented new filters that flag questionable returns. (Post continues below video.)

Legitimate refunds are delayed when the IRS spends additional time reviewing returns before issuing refunds, said Nina Olson, the national taxpayer advocate. When the IRS tries to speed up returns, fraudulent refunds are issued.


"There is no way around these trade-offs," said Olson, who runs an independent office inside the IRS.


Sen. Bill Nelson, a Florida Democrat, said criminals have turned to tax fraud instead of stealing cars or dealing drugs, affecting honest taxpayers.


"Their lives are being turned upside down by identity theft and then tax fraud," said Nelson, who is chairman of the Senate Finance economic growth and fiscal responsibility subcommittee, which held the hearing. "They have their tax refund stolen, and then they are delayed when the IRS sorts out the mess."


Criminals receive identifying information from a variety of sources, according to Miller’s testimony. He cited the case of an Alabama woman, sentenced to prison, who obtained information about student-loan borrowers from her former employer and then filed false tax returns.


Some prisoners also file fake tax returns and claim refundable tax credits, Miller said.

"We see thefts from schools," he said. "We see thefts from hospitals, doctor’s offices."


Nelson has introduced legislation that would impose tougher penalties and make it harder to gain access to the Social Security numbers of people who have died.


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Apr 2, 2012 3:47PM
This is necessary and hopefully that prosecute the fraudsters. Next step up efforts to prevent Medicare/Medicaid fraud.
Apr 3, 2012 1:02AM
I didn't know Bank of America had that many employees.
Apr 3, 2012 3:50PM
One wonders why when you do a search on your ancestors you end up getting their SS death record including the decedents SS Number.  Maybe this has changed but Ancestry, rootsweb and other groups get their data directly from what is released by the Social Security Administration so I do not blame the genealogy groups but the stupidity of the SS Administration for ever releasing the number in the first place.  They created their own nightmare and now we are paying the price in having to hire people to check Social Security numbers against death records. Should be a no brainer if they just allowed the IRS the same access they allowed genealogists.

But the real mystery to me is how the Social Security Administration can lose the death records of someone. In 1966 my grandfather died just as he applied for his SS, my mother received his death benefit to help pay for his burial. But his SS number which I have does not show up in SS records anywhere.  Wonder if this was incompetence or something else.
Apr 3, 2012 6:56PM
Anne, the death records from the census are not released for 72 years. That's why you relative's don't show up in the records yet.  The Social Security Death Index for 1940 and earlier was just released the week. SS numbers become available at that time for deceased members.
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