Government at Work: Handing Out Billions in Tax Refunds to Con Artists

Here’s the good new: the Internal Revenue Service believes it’s
not handing out quite so many billions of dollars to identity
thieves as it used to. Yay, IRS. Your government at work: hectoring
you about your supposed obligation (and
even delight!) to cough up the goods to Uncle Sam while handing
out free money to con artists. And the feds are still doing their
best to prove that crime does pay. The U.S. Treasury
Inspector General for Tax Administration says the latest figures
have the IRS paying out $3.6 billion in bogus tax refunds in
2011.

According to the breezily titled,
Detection Has Improved; However, Identity Theft Continues to
Result in Billions of Dollars in Potentially Fraudulent Tax
Refunds (PDF), dated September 30 but published online
November 7:

Our analysis of Tax Year 2011 tax returns identified
approximately 1.1 million undetected tax returns filed using SSNs
that have the same characteristics of IRS-confirmed identity theft
tax returns. Potentially fraudulent tax refunds issued total
approximately $3.6 billion.

As mentioned, this is an improvement, since TIGTA fingered $5.2
billion in fraudulent returns for 2010.

As the title suggests, the report touts the IRS’s ever-improving
efforts to detect fraud and not dole out cash to scammers.
The key to a more honest world, we’re told, is “[a]ccess to
third-party income and withholding information.” That’s right, if
we’d just cough up more data to Uncle Sugar, he’d stop handing
checks to anybody who asked. We have nobody to blame for ourselves
and our stubborn insistence on not living in glass boxes for the
IRS’s missteps.

When the IRS processes fraudulent returns and mails out checks,
it doesn’t just piss money away, it also delays the processing of
legitimate returns by taxpayers whose Social Security Numbers were
appropriated by the con artists. Well, the live ones, anyway. The
thousands who were dead and buried before returns we submitted in
their names probably don’t care. In fact, though, most of the
fraudulent tax returns were submitted using the data of people who
don’t actually have to file. In addition to those who are pushing
up daisies, that is.

In the 2012 report, TIGTA concluded that, based

on an analysis of Tax Year 2010 tax returns

processed during the 2011 Filing Season, tax fra

ud by individuals filing fictitious tax returns

with false income and withhol

ding is significantly greater th

an what the IRS detects and

prevents. Using characteristics of identity theft confirmed by
the IRS, we identified

approximately 1.5 million undetected tax returns with

potentially fraudulent tax refunds totaling

in excess of $5.2 billion.