JLF Triangle Blog

The Fraud Trifecta: Medicare/Medicaid, Unemployment Insurance, And Tax Returns

Writing in the Wall Street Journal, CPA Jay Starkman lays out growing problems with E-filing-related tax fraud. But before he gets into E-filing, there is this kick-in-the-gut reminder about all the money being stolen from the federal treasury, which of course comes out of the wallets of taxpayers.

Tax fraud, amazingly, is now the third-largest theft of federal funds after Medicare/Medicaid and unemployment-insurance fraud.

 

Now to E-filing.

Fraudulent tax returns can come in the form of tax-identity theft, refund fraud, or return-preparer fraud and are difficult to prosecute. With e-filing, evidence of fraud is difficult to find. There are no signed tax forms, envelopes or fingerprints, and e-filing promises quick refunds.

It’s easy for criminals to e-file using a real name and Social Security number combined with a phony Form W-2 (wages) or fabricated Schedule C (business income). The refund can be posted to an anonymous “Green Dot” prepaid Visa orMasterCard MA -0.98% purchased at a drugstore. Such cards have a routing and account number suitable for direct deposit. The IRS may even correct a fraudulent return to refund the estimated taxes that the real taxpayer already remitted, as happened to one of my victimized clients.

The crooks are everywhere, and you and I keep paying to keep them living in the style to which they’ve become accustomed.

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