Almost 200,000 fraudulent tax returns had been filed by prisoners with the US Internal Revenue Service last year. According to the IRS, criminal offenders have claimed over $1 billion in rebates from behind bars.
The IRS detected the ruse, blocking a total of $2.1 billion in fraudulent refunds in 2012, which is several times the tax fraud discovered and prevented in 2010. Despite these encouraging results, US Treasury inspector-general J Russell George states they are still trying to figure out how to combat the problem:
“Refund fraud committed by prisoners remains a significant problem for tax administration.”
In many cases, according to The Independent tax refunds are paid out before the fraud has been been noticed. Catching errors in billions of forms in the span of a few months can be harrowing for IRS agents.
Arnold Tobias Gervais, 34, is one example of such prisoner tax fraud which did not come to light until this week. In 2009, he filed at least seven tax returns claiming more than $3.4 million using his own name and those of acquaintances. He had gotten away with most of the scheme by making false claims of high earnings from a fake company called Safety, Shoes & More. The business had been falsely claimed to be based in Rome, which meant the company would not be liable for US corporate taxes.
Another example was a Missouri inmate,Kevin Dunham, who was reported to have plead guilty last year to claiming close to $150,000 in fraudulent refunds for himself and others. According to the Huffington Post, IG spokeswoman Karen Kraushaar says that criminals usually use e-filing to commit their fiscal crimes:
“Most taxpayers find e-filing to be quick and easy. Unfortunately, some bad guys have also found it a quick and easy way to commit fraud. To the IRS’s credit, our report found that they are doing a much better job of stopping such fraudsters in their tracks. But more needs to be done.”
If we were able to catch all such fraudulent tax returns by prisoners, the national deficit might be more easily contained. The IRS can only catch so much and now we’re facing the Super Cliff composed of the automatic sequester and the national debt ceiling. Do you think that prisoners should face extra penalties for committing tax fraud crimes?