Huffpost Business

Tax Refund Scam Costing IRS Billions Of Dollars

Posted: Updated:

It's tax season and you know what that means: Time for scams.

The government is cracking down on a scheme that they say has already likely bilked the IRS of billions of dollars, the Wall Street Journal reports. The perpetrators of the scam, which has been going on for at least five years, take the social security numbers of Puerto Ricans -- who don’t have to pay federal income taxes -- and use them to file fake tax returns.

Prosecutors have been able to secure multiple convictions of people involved in the scheme, but have yet to nab any of the top organizers, the WSJ reports.

The Puerto Rican scam is just one of many ways that fraudsters are stealing billions from the IRS and taxpayers. The number of tax refund scams has increased 700 percent over the past three years both because of the prevalence of online filing tools and because the IRS doesn’t cross-check returns against payroll records in an effort to get refunds out quickly. Overall, more than two million fraudulent tax returns were filed last year, costing the government $2 billion, according to CBS.

As of March 9 of this year, the IRS had stopped 215,000 questionable returns, with $1.15 billion worth of refunds, according to Forbes. The most common forms of fraud? Identity theft and "phishing," or trying to get sensitive account information through electronic communication.

A tax refund scam rocked one small Georgia town this year, as more than 67 residents in a town of 5,000 got ripped off, the Atlanta Journal-Constitution reports. Fraudsters posing as legitimate tax prep companies tricked some residents of Elberton, Georgia into letting them file their tax returns then tricked the IRS into sending them most of the refund instead of the victims.

And in North Carolina, the attorney general's office says that as many as 15 taxpayers found that their identities were stolen when they tried to file their returns, according to a local NBC affiliate.

all-also-on-huffpost

Suggest a correction

Around the Web

Billions Lost in Tax-Refund Scam

Tax return scammers steal IDs and billions

Tax scam rattles small Georgia town

Morning MarketBeat: 'Buy the Dips' Still In Vogue

Scammers steal identities to file fake tax returns, claim refunds

Scam watch: Tax refunds, Christian rock concert, loan mods