Prisoners in Florida, Georgia and California lead the nation’s inmate population in scamming payments from an unlikely benefactor: the IRS. Prisoners in the three states received nearly $19 million in IRS refunds during 2009 after filing false or fraudulent tax returns, according to an IRS report to Congress that was included in a federal audit released in January.
The haul was part of $39.1 million in undeserved federal tax refunds the IRS issued to jail and prison inmates nationwide for phantom jobs on phony returns, the data shows. That’s nearly triple the $13.4 million annual in tax refunds the IRS reported it issued to prison scammers just five years earlier.
The IRS said it could not immediately determine how much, if any, of the fraudulent refunds in 2009 has been recovered, because the recapture process “can take several years.”
Although inmates’ prison jobs don’t pay enough to trigger tax withholding, some prisoners and their families may legally receive income from investments, inheritances or other sources that can qualify them for legitimate tax refunds. Washington enacted legislation in 2008 intended to crack down on fraudulent tax refunds claimed by inmates, but the intended enforcement has been bogged down by legal questions.
Evidence in federal court cases indicates they’re typically run by inmates who gain access to the Social Security numbers and identifying information of others – sometimes including fellow prisoners – and then use the data to file false tax returns that generate thousands of dollars in refunds.
In some cases, the inmates search the Internet for listings of businesses that have filed for bankruptcy. Listing a defunct firm as employer on a false tax return can make it difficult for the IRS to verify the claim.
