- The Washington Times - Thursday, May 28, 2015

The IRS has gotten better at detecting fraud but still paid out $2.1 billion in potentially bogus refunds in 2012, according to a new audit Thursday that found the agency paid refunds on nearly 600 tax returns filed to the same address in Kilkenny, Ireland.

In another instance the IRS paid refunds on 133 returns all giving the exact same bank account number — another major fraud frag that the agency missed, doling out nearly $800,000 to that account in 2012 alone, the Treasury Inspector General for Tax Administration said.

Investigators said those returns should have set off alarm bells within the IRS, but agency officials said their screens weren’t yet good enough to weed out fraud at that level. They insisted they’ve gotten better since 2012, and would have caught about half of the 787,000 returns that were probably fraudulent.

“Identity theft continues to be a serious and evolving issue,” the inspector general said.

The new report comes the same week that the IRS acknowledged it had been the target of a complex fraud scam that stole information of about 100,000 taxpayers and bilked the agency of tens of millions of dollars in fraudulent refund claims filed with the information gained from the theft.

That theft has further damaged an agency already reeling from the 2013 tea party targeting scandal and reports that the agency rehired and paid bonuses to employees who were themselves tax cheats.

Congressional committees have vowed to hold hearings on the IRS identity theft, with the first one due next week.

“When the federal government fails to protect private and confidential taxpayer information, Congress must act,” said Sen. Orrin G. Hatch, Utah Republican.

The IRS caught onto the massive identity theft and fraud operation after it had been running for three months.

In its response to the inspector general’s report Wednesday the IRS said its filters for detecting fraud are always getting better.

“As a result of our actions, the number of fraudulent returns filed by identity thieves that are detected and stopped by the IRS has increased over the years,” Debra Holland, commissioner of the IRS’s Wage and Investment Division, said.

Of the nearly 800,000 returns that the inspector general said were potentially fraudulent, the IRS said a majority of them shouldn’t be considered. Of those, more than 72,000 involved such a small amount that it wasn’t worth going after them, the agency said. Another 350,000 or so would now be caught by filters added in May 2013, the IRS said.

Those filters, which total 114 separate checks, weeded out about $5.5 billion in fraudulent returns in 2014, the IRS said — part of a major increase in spotting bogus claims.

One change the IRS made after a 2012 report was to begin checking Social Security income taxpayers reported against the Social Security Administration’s own files. That cut the number of returns likely claiming false Social Security income from more than 93,000 in 2010 to just 3,064 in 2012, cutting the total bogus payout by 96 percent.

Still, the agency had not cleaned up its problem of paying hundreds of thousands of dollars spanning dozens of bogus returns filed to the same address.

One bank account had 151 separate returns linked to it, and was paid $602,175 in refunds in 2012.

Meanwhile, the Kilkenny, Ireland, address was paid $218,974 in refunds on 580 different tax returns. An address in San Luis, Ariz., collected $347,629 in refunds spanning 105 different tax returns — all listing the same place.


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