While tax return fraud seems to have hit epidemic proportions, the Internal Revenue Service today said it has started more than 200 new investigations this filing season into identity theft and refund fraud schemes.
The agency’s Criminal Investigation unit has started 295 new identity theft investigations since January, pushing the number of active cases to more than 1,800.
The effort by the unit is part of a larger effort at the IRS to combat identity theft and refund fraud by pursuing identity thieves, preventing fraudulent refunds from being issued and helping victims of this crime.
The IRS said that since the start of 2014, increased activity by CI has led to more prosecution recommendations, indictments and sentencing hearings, which reflect the overall success by the IRS on the increased number and effectiveness of ID theft filters used during the processing of tax returns. Highlights of this year’s work include:
A new and key component for IRS efforts this year is to investigate the misuse of Electronic Filing Identification Number (EFIN). An EFIN is assigned to tax preparers that have completed the IRS e-file Application to become an Authorized IRS e-file Provider. After the provider completes the application and passes a suitability check, the IRS sends an acceptance letter, including the EFIN, to the provider.
Since the start of the fiscal year through March 31, 2014, the IRS has revoked or suspended 395 EFINS based on recommendations from CI, and CI has initiated 60 EFIN source investigations involving EFINs used by individuals involved in refund fraud and identity theft schemes. By revoking and suspending the EFINs, IRS can prevent the transmission of the fraudulent tax returns, the IRS stated.
In Fiscal Year 2013, the IRS initiated approximately 1,492 identity theft related criminal investigations, an increase of 66% over investigations initiated in 2012. Direct investigative time applied to identity theft related investigations has increased 216% over the last two years. Prosecution recommendations, indictments, and those convicted and sentenced for identity theft violations have increased dramatically since FY 2011. Sentences handed down for convictions relating to identity theft have been significant, ranging from two months to 317 months.
The IRS detailed some recent cases including:
• On March 27, 2014, A Miami man was convicted by jury of one count of access device fraud and five counts of aggravated identity theft. According to the indictment and evidence, the defendant obtained an IRS Electronic Filing Identification Number and used it to file 52 fraudulent tax returns, many filed with stolen identities.
• On Feb. 27, 2014, in Tampa, Fla., two defendants were sentenced to 121 months and 192 months in prison, respectively. As part of their sentence, the court entered a $790,421 money judgment against each, as well as $790,421 in restitution. Both pleaded guilty to conspiring to commit wire fraud and aggravated identity theft. According to court documents, the defendants and others orchestrated a scheme to defraud the United States Treasury by causing fraudulent federal income tax returns to be filed using stolen identities, and soliciting personal identifying information and addresses from co-conspirators in Florida and Georgia. To facilitate the scheme, the conspirators coordinated the withdrawal of fraudulently obtained tax refund amounts from prepaid debit cards. The identities used to file the fraudulent tax returns in this scheme belonged to individuals living in various states across the country. As part of the conspiracy, at least 322 federal income tax returns for tax year 2011 were filed claiming refunds of $2,701,844.
By Jarrett Neil Ridlinghafer
CTO of the following –
Synapse Synergy Group
Chief Technology Analyst, Author & Consultant
Compass Solutions, LLC
Cloud Consulting International