US prisoners filed more than 173,000 fraudulent tax returns in 2012, claiming $1.1 billion in rebates
Ruse detected by the IRS, which blocked a total of $2.1bn in fraudulent refunds in 2012
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Friday 18 January 2013
Prisoners filed more than 173,000 fraudulent tax returns with the US Internal Revenue Service last year, with offenders claiming $1.1bn (£690m) in rebates from behind bars, it has emerged.
The ruse was detected by the IRS, which blocked a total of $2.1bn in fraudulent refunds in 2012, more than six times the $384m it blocked in 2010.
According to a report released by the US Treasury’s inspector-general for tax administration, J Russell George, fraudulent tax returns from prison inmates has been rising, from about 77,000 in 2010 to 168,000 in 2011 before swinging past 170,000 in 2012.
“Refund fraud committed by prisoners remains a significant problem for tax administration,” he said.
In many cases, the fake refunds are not detected until the money has been paid out.
This week, the case of Arnold Tobias Gervais, 34, came to light. He filed no less than seven tax returns in 2009 – six in his own name and one in the name of an acquaintance – claiming more than $3.4m. He is reported to have received nearly $3m as a result of the scheme, which was based on claims of significant earnings from a fake company called Safety, Shoes & More. The fictitious business was reported to be based in Rome.
It is not difficult to guess what put Gervais in prison in the first place: according to a Georgia newspaper, he was jailed in 2008 after submitting a fraudulent tax return claiming a refund of more than $600,000.
Rivalling Gervais is Kevin Dunham, a Missouri inmate, who was reported to have pleaded guilty last year to claiming more than $139,999 in fraudulent refunds for himself and others.
More than $50,000 was paid out as a result of Dunham’s scheme, which involved preparing false returns using a prison typewriter and then secretly passing them to his friends’ families, who sent the fabricated documents to the IRS. His fee for this in-house service? It could be seen as a steal at $200 to $300 per return.
The Treasury Department report says the IRS and prison officials are stepping up efforts to enforce the law and sharing more information, but it also calls for more to be done to stop tax fraud among inmates.
The document released to the public is heavily redacted and contains few details about the scams run by inmates, although it is thought many use stolen identities to file fraudulent returns. Tax information – including that of prison inmates – is protected by privacy laws.
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