Wednesday Waste: Tax Fraud Edition

The inspector general who oversees the IRS released a report estimating $21 billion in fraudulent tax refunds are set to be paid out to identity thieves in the next five years. Past examples of fraudulent payments include $3.3 million in refunds to one address that was listed on 2,137 separate tax returns and another $470,000 sent in 300 direct deposits to the same bank account.

The report went on to detail simple measures that the agency could do to reduce the amount of fraud, including steps such as limiting the number of direct deposits to a single bank account, depositing refunds to accounts only with that individual’s name on the account, and using existing federal databases to screen for potential fraud. The last measure would actually require an act from Congress in order to allow the agency permission to access other federal databases.

J. Russell George, the treasury inspector general for tax administration, said, “At a time when every dollar counts, these results are extremely troubling… Undetected tax refund fraud results in significant unintended federal outlays and has the potential to erode taxpayer confidence in our nation’s system of tax administration.” He recommended the government agency take new measures to stop the waste of federal dollars. With a budget deficit set to hit $1 trillion by the end of the fiscal year, “every dollar counts.”

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