IRS Handing Out Refunds to Identity Thieves

According to a recent audit report by the Treasury Inspector General for Tax Administration (TIGTA), IRS is doling out big bucks to identity thieves.

IRS has reported that it detected something like $6.5 billion in fraudulent refunds for processing year 2011.  TIGTA thinks there could be as much as $5.2 billion more, and that IRS could issue $21 billion in fraudulent tax refunds over the next five years!

Some of the factors leading to this mess, per TIGTA:

  • Delayed access to third-party income and withholding information – such delays make it difficult for IRS to detect fraudulent tax refunds at the time tax returns are processed.
  • IRS has not developed processes to obtain and use the third-party information that is available at the time tax returns are filed.
  • The use of direct deposits, including debit cards, to claim fraudulent tax refunds increases the risk that the IRS will not detect identity theft.

Nice to know that IRS management agrees with TIGTA’s recommendations and has taken, or plans to take corrective action.  IRS does not agree, however, with the suggestion that potentially $21 billion in fraudulent refunds might go out the door over the next five years.