One of the chronic problems at the IRS is they keep issuing refunds to criminals.  Refund fraud (a criminal form of tax relief) is a widespread issue reaching all the way into our country’s prisons.  Most people would probably be shocked to know how common refund fraud is in prison.

The Treasury Inspector General for Tax Administration (TIGTA) has carefully studied this problem over the past seven years and the data shows things are not getting better.

In calendar year 2004, there were 18,103 fraudulent tax returns filed by prisoners and the IRS handed out $13.4 million in refunds to them.  In 2007, there were 37,447 fraudulent tax returns filed by prisoners and the IRS paid out $29.2 million.  The most recent data is from 2010 and it shows that there were a staggering 91,434 fraudulent tax returns filed from prison.  The IRS paid $35.2 million that year.  But to be fair, they also prevented $757.6 million worth of refunds (identifying them as fraudulent before the damage was done).

In a new study, TIGTA explains how the “Prisoner File” which the IRS relies on to help them vet out bad refund claims is often innacurate and incomplete.  Furthermore, the rules allowing certain communications between the Treasury and the Federal Bureau of Prisons have expired.  Given the statistical trend of this tax problem, it obviously should be an area of focus for our government in coming years.