Identity Theft Costs IRS Billions Every Year

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According to a recent report by the Treasury Inspector General for Tax Administration (TIGTA), falsely filed tax returns are likely to cost the IRS as much as $21 billion over the next five years.

"The report ... documents the growth in tax fraud through identity theft and includes previously unreleased details of potentially fraudulent returns," writes Businessweek's Richard Rubin. "For example, the IRS sent more than $3.3 million in refunds to an address in Lansing, Michigan, that was listed on 2,137 separate tax returns. In at least 10 cases, the IRS sent more than 300 direct deposits of refunds totaling more than $470,000 to the same bank account."

"The IRS said it detected 938,664 fake tax returns during the 2011 processing year, which would have cost $6.5 billion," writes PCWorld's Jeremy Kirk. "While TIGTA said the figure was 'substantial,' it believes the IRS doesn't know how many identity thieves are filing bogus returns and how much money is lost. TIGTA said it studied identity-theft characteristics and found 1.5 million fraudulent tax returns that were not detected by the IRS, which cost U.S. government coffers more than $5.2 billion."

"The IRS challenged the finding that it risks issuing ID thieves more than $20 billion during the next few years, noting that ongoing anti-fraud procedures could diminish that number," writes Nextgov's Aliya Sternstein. "Those efforts include new screening filters that can identify false tax returns before they even are processed. As of April 19, the IRS had halted about $1.3 billion in potentially fraudulent tax refunds as a result of these new checks, the audit stated."