In November 2013, the Treasury Inspector General for Tax Administration (TIGTA) announced a followup report on fraudulent tax refunds issued by the Internal Revenue Service (IRS). For the 2011 tax year, $3.6 billion in potentially fraudulent tax refunds were sent to at least 1.1 million individuals. The returns were filed using fake Social Security numbers and were sent to Lithuania, Ireland and Bulgaria.
According to the report, the IRS sent 701 potentially fraudulent returns to Bulgaria worth a total of $490,735. Lithuania received $228,993 in 676 questionable filings, with 655 going to a single address. Ireland was not far behind with 657 potentially fraudulent refunds totaling $282,926, as well as 343 returns going to an address in Shanghai, China. In addition, the TIGTA also identified 141,000 tax returns that were filed using stolen individual taxpayer identification numbers (ITINs). According to The Washington Post, these are issued to workers who do not qualify for Social Security numbers. In 2011, the IRS issued $385 million for those returns.
In a separate TIGTA report released on Sept. 26, the inspector general found that the IRS spent an average of 312 days resolving potential identity theft claims. The agency found that 1.6 million taxpayers were affected by fraudulent claims as of June 2013, up from 1.2 million affected during all of 2012. The Post noted the problems could have risen from the agency requiring staffers to answer telephone inquiries about the theft. According to the TIGTA, nearly three-quarters of 183 IRS employees surveyed found that the process for dealing with identity theft claims was confusing.
While no government theft is redeemable, it is important to note that IRS is making progress. Improper returns to identity thieves were down $1.6 billion compared to the 2010 filing season. In 2010, the TIGTA identified $5.2 billion in questionable tax returns. USA Today reported the IRS is developing new identity theft screening filters and has since 2011 stopped 12.6 million questionable returns worth over $40 billion in refunds.
For more information on questionable spending by the IRS and other federal agencies check out Spendopedia.