The IRS: Billions are wrongfully paid out to Scammers from this Easy Target

Rashia Wilson bought a $92,000 Audi, proclaimed herself a millionaire, and announced on her Facebook page that she was “the queen of IRS tax fraud,” as prosecutors told the story. 

But even more than her flamboyance, it was the seeming ease of her crime that was most stunning: She and an accomplice were alleged to have hijacked the identities of other taxpayers to get fraudulent refunds. They used stolen Social Security numbers, a computer, and basic knowledge of how to file a tax return, according to the government.

After the Florida mother of three was caught and pleaded guilty last year to crimes totaling at least $3 million, her defense attorney, Mark O’Brien, made his own plea. He said in court that he hoped the “IRS will figure out a way to prevent this from happening in the future, so someone with a sixth-grade education can’t defraud them so easily.”

Across the country, the theft of taxpayer identities has taken off, while receiving far less attention than the loss of credit card information. Even some drug dealers, always with an eye out for easy profits, have turned to taxpayer identity theft after hearing how uncomplicated it was to scam the IRS. A medical assistant at a nursing home stole the identities of hundreds of patients. A prison guard stole the identities of inmates and filed false returns under their names.

All told, in just the first six months of last year, 1.6 million taxpayers were affected by identity theft, compared with 271,000 for all of 2010, according to a recent audit by the Treasury Department’s inspector general. While the IRS said it discovered many of the incidents, the cumulative thefts have resulted in billions of dollars in potentially fraudulent refunds, according to an array of government reports. 

“I’ve had a police chief tell me ‘street crime is down because everybody is now filing false IRS returns,’ ” IRS Commissioner John Koskinen,who took office last month, said in an interview. 

While Koskinen stressed that the IRS uses a series of “filters” that are increasingly successful in catching identity thefts before refunds are paid, he acknowledged that “this problem has exploded’’ and that the agency is in a constant race to keep its detection techniques a step ahead of the thieves. “It is,’’ he said, “a little like ‘Whac-a-Mole,’ knock them down here and they come up over there.”

Kathryn Keneally, US Assistant Attorney General for the tax division, said her office has an increasing number of prosecutions of taxpayer identity theft underway. She listed one heart-wrenching case after another: military personnel who had their identities stolen while deployed, and parents who learned that their recently deceased child’s identity had been pilfered.

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