Do you ever watch TV police dramas?  In the typical TV crime show script, there are multiple suspects involved in a case.  Often the police and the district attorney try to “cut a deal” with one of the suspects and get him/her to “flip” on the other one.  Whoever comes forward first gets the better deal, meaning a recommendation to the judge for a shorter sentence.  Call me crazy, but we may see today’s Fraud of the Day from The Telegraph about a Missouri defendant involved in a tax refund scheme in a future “ripped from the headlines” episode of your favorite police drama.

The article reports that the defendant pleaded guilty to one count of filing a false tax return.  She was one of six individuals (think she was the first one to cut a deal?) indicted on that charge in July and accused of being involved in a scam run by two women.  (I’m guessing she flipped on them.)  Authorities say it worked like this:  the defendant would go to a tax preparer, provide fake W-2 forms and then request advanced payments on the funds.  The forms made it appear that the defendant worked for a cleaning company.  Here’s the catch:  the cleaning company didn’t receive any services from clients.  (Sounds a bit sketchy.)  Also, two suspects that investigators say ran the scheme supposedly “obtained the forms, prepared them and provided them to the others to file false tax returns and receive part of the funds.”  Once the defendant and the other suspects received the advanced payments, they would then split the cash with the two who allegedly orchestrated the fraud.

The two women suspected of running the scheme face a number of charges including filing a false federal tax return, conspiracy and making false statements to investigators.  Four other suspects were charged with filing a false tax return.  All of these cases are pending.  They are, of course, innocent until proven guilty.

This case raises a number of allegations:  fake returns, false statements about employment and possible shell companies.  And, what are these really?  Identity data points.  The incident of fraud admitted to by the defendant and those alleged against the other suspects would likely be flagged for further investigation by an identity management filter.  My point is simple:  federal and state revenue agencies should leverage identity management solutions to detect potential fraud and stop tax refund fraud.

  1. I was at a seminar where an IRS agent was speaking. He said that the drug dealers are getting harder to find out on the street in some cities. Why? They are doing this type of fraud. It is much easier to do tax fraud than sell drugs. Much more profit, no guns, no one to deal with as it is all done via electronic filing. Congress has told the IRS that the IRS MUST take electronic tax returns and provide refunds almost immediately (2 or 3 days or whatever it is). The IRS agent said that there is not enough time to do any type of auditing of that and the cash is out the door and it will never be recouped. So this problem will get worse and worse until Congress decides that immediate access to bogus refunds is not in the nation’s best interests.

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