According to Treasury Inspector General for Tax Administration J. Russell George, identity thieves who file fraudulent tax returns could rake in an estimated $26 billion over the next five years because the IRS cannot keep up with the amount of the fraud, CNN reports.
"Our analysis found that, although the IRS detects and prevents a large number of fraudulent refunds based on false income documents, there is much fraud that it does not detect," said George's prepared testimony before a joint hearing of the House Ways and Means Subcommittees on Oversight and Social Security.
The Inspector General’s report is the first detailed analysis of the tax refund fraud problem, and the $26 billion projection outstrips other estimates of identity theft tax fraud.
George’s office reported that last year about 940,000 returns totaling $6.5 billion were related to identity theft, and auditors found another 1.5 million undetected tax returns with more than $5.2 billion in fraud.
"The primary characteristic of these cases is that the identity thief reports false income and withholding to generate a fraudulent tax return," George said.
"Without the falsely reported income, many of the deductions and/or credits used to inflate the fraudulent tax refund could not be claimed on the tax return.”
“The individuals whose identities were stolen may not even be aware that their identities were used to file a fraudulent tax return."
In 2010, 48,357 Social Security numbers were used multiple times as a primary taxpayer identification number.
The Wall Street Journal reports that, since December 2011, eight taxpayers have been sentenced to prison in connection with identity theft.
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