I was a little disgusted when I read about a California inmate that was committing tax Fraud from behind bars. Sadly, this has been going on for a long time. Here is a post, I did on this phenomenon in 2005 and I have seen reports of this surface frequently since then
The LA Times reported that, "Howard Webber, 52, was found guilty by a jury Tuesday of conspiring to use stolen identities to file Fraudulent Tax Returns, a scheme that he operated for two years from behind bars that netted him and an accomplice more than $600,000."
Apparently, Howard recruited inmates, who for a stipend of $75.00, provided all of their identity information to commit the scheme. Howard and a friend (Clifford Bercovich) were able to create a limited liability company (LLC) called "Inmates Assets Recovery and Liquidation Services" and used W2 forms with made up job information and withholding amounts to facilitate the fraudulent tax returns. The article is not clear whether or not the LLC was properly registered, but there are a lot of paid services that can be used to register an LLC (even online).
Fraudulent W2s are not new either. A budding fraudster can buy them at an office supply store, or even order them online. They use "made up figures" and often inflate them to bolster the refund amount. A search on Google shows how easy it is to obtain W2 blanks.
In 2016, the IRS identified 20,224 potentially fraudulent tax returns filed by prisoners.
Similar Tax Fraud using bogus stolen identity information and faux financial figures doesn't just happen from prison. It is in fact, a very costly problem, which is ultimately paid for by the honest taxpayer. I have seen estimates (no one probably knows for sure) that this is a $20 billion-plus problem.
To be fair, in recent years the IRS is getting a lot more aggressive in dealing with this phenomenon. In 2016, an Inspector General report identified $835,183 refunds that were suspected fraud worth $4.3 billion. They have also expanded the data filters in their computer systems used to identify fraud from 11 in 2012 to 183 in 2016.
Also revealed in testimony to Congress last year was another phenomenon that has long affected any entity storing personal and confidential information, which is that insiders with access to this information are sometimes involved. No amount of computer security fixes will stop someone, who has been given access to a system.
Of course, with the record amount of data breaches discovered in 2016, there is probably plenty of information available for sale on the Dark Web to facilitate this type of fraud. Fraudsters see the activity as extremely lucrative and a huge amount of refund fraud is committed by professional fraud groups. These groups often net between $4 and $8 thousand per phony return using the earned income credit. This credit is designed to help low-income taxpayers.
On a closing note, I wonder if the tax code is simplified (promised by a lot of politicians), it will be easier to stop these losses. The fact that the system (literally a regulatory maze) is so complex probably makes it easier for dishonest people to camouflage their financial misdeeds.
If you are interested in lowering learning more about how tax fraud is committed, here is a link to the Dirty Dozen Tax Schemes from the IRS.
The LA Times reported that, "Howard Webber, 52, was found guilty by a jury Tuesday of conspiring to use stolen identities to file Fraudulent Tax Returns, a scheme that he operated for two years from behind bars that netted him and an accomplice more than $600,000."
Apparently, Howard recruited inmates, who for a stipend of $75.00, provided all of their identity information to commit the scheme. Howard and a friend (Clifford Bercovich) were able to create a limited liability company (LLC) called "Inmates Assets Recovery and Liquidation Services" and used W2 forms with made up job information and withholding amounts to facilitate the fraudulent tax returns. The article is not clear whether or not the LLC was properly registered, but there are a lot of paid services that can be used to register an LLC (even online).
Fraudulent W2s are not new either. A budding fraudster can buy them at an office supply store, or even order them online. They use "made up figures" and often inflate them to bolster the refund amount. A search on Google shows how easy it is to obtain W2 blanks.
In 2016, the IRS identified 20,224 potentially fraudulent tax returns filed by prisoners.
Similar Tax Fraud using bogus stolen identity information and faux financial figures doesn't just happen from prison. It is in fact, a very costly problem, which is ultimately paid for by the honest taxpayer. I have seen estimates (no one probably knows for sure) that this is a $20 billion-plus problem.
To be fair, in recent years the IRS is getting a lot more aggressive in dealing with this phenomenon. In 2016, an Inspector General report identified $835,183 refunds that were suspected fraud worth $4.3 billion. They have also expanded the data filters in their computer systems used to identify fraud from 11 in 2012 to 183 in 2016.
Also revealed in testimony to Congress last year was another phenomenon that has long affected any entity storing personal and confidential information, which is that insiders with access to this information are sometimes involved. No amount of computer security fixes will stop someone, who has been given access to a system.
Of course, with the record amount of data breaches discovered in 2016, there is probably plenty of information available for sale on the Dark Web to facilitate this type of fraud. Fraudsters see the activity as extremely lucrative and a huge amount of refund fraud is committed by professional fraud groups. These groups often net between $4 and $8 thousand per phony return using the earned income credit. This credit is designed to help low-income taxpayers.
On a closing note, I wonder if the tax code is simplified (promised by a lot of politicians), it will be easier to stop these losses. The fact that the system (literally a regulatory maze) is so complex probably makes it easier for dishonest people to camouflage their financial misdeeds.
If you are interested in lowering learning more about how tax fraud is committed, here is a link to the Dirty Dozen Tax Schemes from the IRS.
This post first appeared on Fraud, Phishing And Financial Misdeeds Redux, please read the originial post: here
