$14 Million In Refunds Issued by IRS in Stolen Identity Refund Fraud Scheme Indicted

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$14 Million In Refunds Issued by IRS in Stolen Identity Refund Fraud Scheme Indicted

Yet another tax return related identity theft scheme was recently indicted, this one with ties all across Orange County from La Habra to Newport Beach.  I have complained before about the constant stream of money the IRS is losing due to these schemes.  Often, the IRS is too slow to catch the perpetrators and too slow to recognize the tell-tale signs of the scheme.  On the other hand, the IRS seems to be under pressure to issue refunds quickly, or suffer millions of complaints to Congress from people who depend on their refunds.  This is one of the worst offenders in that respect that I have seen in a while.  According to the press release:

According to the affidavits supporting the complaints, the Internal Revenue Service has identified approximately 7,000 fraudulent tax returns related to this scheme that cumulatively sought about $38 million in refunds. The IRS issued about $14 million in refunds, and the money was deposited into and laundered through bank accounts used in this scheme. The fraudulent tax returns were filed and the bank accounts were opened with personal identifying information that had been stolen from thousands of victims.

The IRS and Congress has been aware of these schemes for several years.  Granted, they started out as mail-in schemes and then moved to e-filing and direct deposits, but the latter version has been in existence for several years, and this one fits the mold. Nonetheless, the DOJ identifies the problem as only growing.  The press release quotes Eileen M. Decker, the United States Attorney, as stating:

“Stolen identity refund fraud schemes are a growing problem that victimize both the United States government and individuals who have tax returns fraudulently filed in their names,” said United States Attorney Eileen M. Decker. “We are devoting more resources to combat this problem and will continue to pursue organizations that engage in this type of fraud. The cases unsealed today demonstrate that we will dismantle these criminal operations and stop schemes that target innocent Americans and steal taxpayers’ money.”

Furthermore, the acting Special Agent in Charge for ICE (Immigration and Customs Enforcement), seemed to be surprised by the scheme:

“The complexity and audacity of this scheme were truly astounding and illustrate the lengths to which fraudsters will go to game the system for financial gain,” said Mark Selby, acting Special Agent in Charge for U.S. Immigration and Customs Enforcement’s Homeland Security Investigations in Los Angeles. “Identity theft and tax fraud result in billions of dollars in losses every year in this country and cause incalculable heartache and financial harm to law-abiding consumers. We owe it to them to pursue these cases aggressively, making it clear that those who brazenly enrich themselves on the back of the American taxpayer, as these defendants allegedly did, will be held accountable for their crimes.”

We should be astounded, as well, because it still seems like the problem has not been stifled despite various IRS responses.  How long will this go on before Congress and the IRS are able to devote the necessary resources to this issue?

Daniel W. Layton is the principal of Tax Attorney OC.  He is a former Federal prosecutor and IRS trial attorney.

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