March 21, 2019

IRS arrest and indict tax fraudsters and identity thieves

In recent weeks, the Internal Revenue Service conducted a national two-week enforcement and education campaign to combat refund crimes and identity theft working with the Department of Justice Tax Division and U.S. Attorneys around the country.

The tax-related identity theft crackdown resulted in IRS Criminal Investigation officers (CI) arresting 11 and indicting 15 individuals and saw five other individuals or businesses sentenced who perpetrated some type of refund fraud or identity theft scheme.

The IRS established the Security Summit Initiative in 2015 in a public-private sector effort to safeguard the nation’s taxpayers against identity theft refund fraud. The Security Summit members which include 42 state agencies and 20 industry offices together with IRS, collaborate to fight tax-related identity fraud.

"Identity theft is a pervasive crime and stopping it remains a top priority of the IRS," said IRS Commissioner Chuck Rettig. "The IRS, with the help of our Security Summit partners, continues to make progress in this area, but we need to continue our significant efforts to protect taxpayers and assist those who have been a victim of identity theft. We are fighting this problem with enhanced systems, smarter technology and the efforts of our dedicated workforce, including Criminal Investigation. We will retain our relentless, vigorous pursuit of those who prey upon others in this arena."

The IRS is also targeting and aggressively prosecuting unethical tax preparers who devise schemes to fraudulently obtain larger refunds by falsifying items on their clients’ tax returns and charging their clients a percentage of the refund or, set high fees for preparing the returns.

“Millions of taxpayers put their trust in tax professionals to prepare accurate and lawful returns,” said IRS criminal investigation chief Don Fort in a statement. “Unfortunately, a few bad apples take advantage of that trust for their own greed and profit. CI's special agents are highly skilled at unraveling fraudulent schemes. With our partners in other agencies and the private sector, we are dismantling these crooked enterprises and enforcing our tax laws.”

In a recent conviction of January 28, 2019, a Minneapolis-based tax return preparer was sentenced to serve ten years and one month in federal prison for managing and directing a fraudulent return-preparation business that prepared tax returns reporting false dependents, fake business income and losses, incorrect deductions and credits, and false filing statuses, to get his clients excessively high tax refunds. The preparer maintained control over his clients’ refunds by instructing those refunds be deposited into the preparer’s bank account, causing the preparation fee to be directly withdrawn from the refund. According to the DOJ, this tax loss was over $2.5 million dollars.

On March 5, 2019, a New York tax preparer pleaded guilty to numerous counts of aggravated identity theft and filing false tax returns. A sentencing date has not yet been set, but the totality of charges potentially carries over a 40-year federal imprisonment sentence.

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