IRS Continues to Battle Tax Refund Fraud

IRS Continues to Battle Tax Refund Fraud

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WebCPA reports that the IRS increased the number of fraudulent tax refund claims it detected and stopped during the 2011 tax-filing season by 171 percent over the previous year:

As of April 30, 2011, the IRS had identified 775,723 tax returns with $4.6 billion claimed in fraudulent refunds and prevented the issuance of $4.4 billion, or roughly 96 percent, of those fraudulent tax refunds, according to a new government report by the Treasury Inspector General for Tax Administration. That represents a 171 percent increase in the number of fraudulent returns identified during the same period in 2010.

“We are working diligently to identify and stop all fraudulent returns and achieved an increase of 171 percent over last year in the number of fraudulent returns identified,” wrote Richard Byrd Jr., the commissioner of the IRS’s Wage and Investment Division, in response to the report. “This was accomplished, in part, by improved identification and screening of prisoner tax returns. We anticipate that our expanded efforts in this area will have a long-lasting and significant impact in preventing the payment of erroneous or fraudulent refund claims.”

The IRS selected 199,854 tax returns filed by prisoners for fraud screening, representing a 256 percent increase compared to last year.

That’s certainly good news, but then there’s this:

However, the IRS was unable to identify 140,596 taxpayers who erroneously claimed $140.2 million in tax credits due to processing errors. TIGTA identified several problematic credits, including the First-Time Homebuyer Credit, the Adoption Credit, the Nonbusiness Energy Property Credit, and the Plug-in Electric and Alternative Motor Vehicle Credit.

In addition, 26,649 taxpayers had their Homebuyer Credit inaccurately processed, $5.8 million in repayment amounts was not assessed, and $675,063 in repayment amounts was erroneously assessed.

The findings were part of TIGTA’s review of the IRS’s performance during the 2011 filing season. The report noted that the IRS received 130.7 million individual income tax returns and issued approximately 98.2 million refunds totaling $277.1 billion during tax season this year.

About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida


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