IRS Flubs it Again: Pays $4 Billion to I.D. Thieves

Brianna Ehley
The Fiscal Times

The Internal Revenue Service doled out $4 billion dollars to identity thieves in 2011, by sending millions of fraudulent tax refunds to people who used stolen Social Security numbers.

Some of the money was sent to addresses in Lithuania, Ireland and Bulgaria.

Good work, guys!


At least 655 refunds went to one address in Lithuania, according to a new report by the Treasury Inspector General for Tax Administration.

And that was considered a good year.

The IRS has the dubious distinction of paying out more than $12 billion in fraudulent returns in 2011, $4 billion more than the year before, the auditor said. The agency says it has stepped up its fraud detection efforts, but the thieves are getting more aggressive.

“The constantly evolving tactics used by scammers to commit identity theft continues to be one of the biggest challenges facing the IRS, and we take this issue very seriously,” the IRS said in a statement in response to the report. “The IRS has a comprehensive and aggressive identity theft strategy that focuses on preventing refund fraud, investigating these crimes and assisting taxpayers victimized by it.”

This is the latest in a string of management problems resulting in waste and abuse at the IRS due to the agency’s lax oversight. Here are a few others:

Although the auditor said the IRS does a good job of eventually identifying the proper owners of stolen Social Security numbers, a separate report by TIGTA released Thursday said the agency is incredibly slow in closing the cases. The IRS spent an average 312 days resolving each case, the auditor said. 


“Identity theft is a growing epidemic, and I continue to be troubled by the lengthy case-processing delays and tax-account errors experienced by victims of tax-related identity theft,” said inspector general J. Russell George. 

He blamed the agency’s lengthy case-closing process on “staff’s lack of understanding about relevant protocol.” The auditor found that nearly three-quarters of the 183 IRS employees surveyed called the procedures for fraud detection “confusing.” 

To avoid confusion and improve efficiency TIGTA said the IRS should ensure that workers assigned to handle ID-theft cases work exclusively on those matters. The agency agreed with the recommendations.