IRS Has Already Flagged 2 Million Tax Returns

With nearly a month left before the official filing deadline for Americans’ tax returns, the Internal Revenue Service has already identified and started to review nearly 2 million tax returns which it has flagged as fraudulent. The number is as many as the agency flagged in the entire 2011 filing season, its Deputy Commissioner told a US Senate subcommittee on Tuesday. The official attributed much of this fraud to the growing occurrence of identity theft.

In 2011, the IRS claims it prevented $14 billion in fraudulent returns, and has added hundreds of employees to its anti-fraud division and added new filters to its system that help flag questionable returns. This has also had the side-effect of delaying millions of legitimate refunds, a trade-off which the IRS says is unavoidable.

Officials say that tax fraud has been growing rapidly in recent years, as criminals increasingly find that the people whose identities they steal have no money in the bank and insufficient credit history to borrow or qualify for credit cards. As a result, they file fraudulent tax returns, claiming every tax credit they can to maximize the refunds, preying on the unemployed and underemployed who might not even be planning on filing a return. Legislators across the country are proposing to stiffen the penalties for identity theft and tax fraud as the trend continues to grow.