FraudNews
10-30-2013, 12:56 AM
In the first four months of the year, the Internal Revenue Service prevented nearly $1.2 billion in payments from being sent to fake tax returns. Despite that, according to an investigative report, the agency is still vulnerable from a lack of data in the private sector that could permit the waste of billions of dollars.
The tax agency uses third-party information from businesses to verify what people report as income and if their withholdings are correct. It’s the simplest way to learn whether or not taxpayers are being honest and the most important tool for the IRS to use to recognize and keep tax refund fraud from occurring.
All too often, tax officials don’t have much information to track down the “fraudsters”, which makes it harder to catch the billions of dollars that are paid out. In fact, most of the present third-party data isn’t obtainable until after the April 15 deadline and the returns are managed. Congress would have to take action and change the tax season filing date that would allow fraud detection agents could attain that important information.
While the report was finished in August and recently released, most of it was hidden so possible fraudsters were not able to learn how the IRS learns of bogus tax returns and tracks them down. The report is a followup to a July 2012 investigation that found the IRS missed over one million fraudulent tax returns in 2010, paying out a possible $5.2 billion in fake refunds.
The IRS implemented the Electronic Fraud Detection System, which should red-flag tax returns thought to be fake. The system began in 1994 but the IRS feels it’s an outdated system and will use a new one in 2015. Officials with the IRS said they are trying to better their fraud-detection abilities.
The agency said in the couple of years that the returns were processed, it learned and altered the processes where controls had to be improved and took new tactics that could effectively deal with the threats by the tax fraudsters.
According to the tax agency, there are two common falsehoods people put on their tax returns: income or withholding misstatements. However, the agency said the majority of the returns are because of identity theft; criminals that decide to file false claims.
Since the surface of the significant number of fake tax returns in 2010, IRS investigators bettered its techniques for fraud-identification. In fact, the IRS, in 2012, was able to halt the sending of $4.6 billion to fraudulent tax returns. It’s not known if the enforcement has gotten better or if more fraudulent forms were filled.
The tax agency uses third-party information from businesses to verify what people report as income and if their withholdings are correct. It’s the simplest way to learn whether or not taxpayers are being honest and the most important tool for the IRS to use to recognize and keep tax refund fraud from occurring.
All too often, tax officials don’t have much information to track down the “fraudsters”, which makes it harder to catch the billions of dollars that are paid out. In fact, most of the present third-party data isn’t obtainable until after the April 15 deadline and the returns are managed. Congress would have to take action and change the tax season filing date that would allow fraud detection agents could attain that important information.
While the report was finished in August and recently released, most of it was hidden so possible fraudsters were not able to learn how the IRS learns of bogus tax returns and tracks them down. The report is a followup to a July 2012 investigation that found the IRS missed over one million fraudulent tax returns in 2010, paying out a possible $5.2 billion in fake refunds.
The IRS implemented the Electronic Fraud Detection System, which should red-flag tax returns thought to be fake. The system began in 1994 but the IRS feels it’s an outdated system and will use a new one in 2015. Officials with the IRS said they are trying to better their fraud-detection abilities.
The agency said in the couple of years that the returns were processed, it learned and altered the processes where controls had to be improved and took new tactics that could effectively deal with the threats by the tax fraudsters.
According to the tax agency, there are two common falsehoods people put on their tax returns: income or withholding misstatements. However, the agency said the majority of the returns are because of identity theft; criminals that decide to file false claims.
Since the surface of the significant number of fake tax returns in 2010, IRS investigators bettered its techniques for fraud-identification. In fact, the IRS, in 2012, was able to halt the sending of $4.6 billion to fraudulent tax returns. It’s not known if the enforcement has gotten better or if more fraudulent forms were filled.