Tax refund fraud is one of our most popular topics here on Fraud of the Day – and with good reason.  I write about tax refund fraud because it is becoming an epidemic.  Every day fraudsters are thinking up new ways to game the system, and one of the most popular ways to do it is by committing tax refund fraud.  Today’s Fraud of the Day from infoZine presents another potential way that a fraudster could game the system and steal your tax dollars.

The article reports that a postal carrier has been indicted by a federal grand jury of conspiracy to file false claims, mail fraud, aggravated identity theft and embezzlement from the mail.  According to the indictment, the defendant was a postal carrier who “was part of a stolen identity refund fraud conspiracy.”  The article goes on to describe how authorities say the conspiracy worked:  “Members of the conspiracy filed false tax returns using stolen identities (because that’s how most government benefit fraud is being perpetrated these days – with stolen identities) from various locations including the Northern District of Alabama.  The fraudulent tax refunds were directed to debit cards that were mailed to addresses on [the defendant’s] postal route in Montgomery, AL.  [The defendant] retrieved the debit cards from the mail and, for a fee, provided them to a co-conspirator.” (If this is true, this guy would have risked the most for the least gain – and was probably always going to be the one who got caught.)

It is important to remember that the defendant is innocent until proven guilty.  He deserves his day in court.  The scenario alleged in the indictment does offer some insight into a potential way of defrauding the government.  And, that’s what the Fraud of the Day is all about:  educating people, particularly public servants who have a chance to stop fraudsters, about how fraud is being perpetrated against government programs.

So, what can we learn about preventing fraud from this scenario?  The answer is in the data.  To perpetrate tax refund fraud, fraudsters generally steal the personally identifiable information (PII) of others and use bogus addresses.  These are all data points that can be analyzed against public records databases to verify and authenticate whether the individual requesting the recipient is who he or she claims to be.

And, what about the mail carrier’s alleged involvement?  He supposedly collected the debit cards from the mail in his route.  For anyone thinking of becoming involved in a conspiracy to commit fraud, always remember:  the more people involved in a conspiracy, the more chances for a weak link and getting caught.

  1. Peter, I took this right off the IRS web site, from the Financial Education and Asset Building (FEAB)Opportunities for Taxpayers. I hope this helps to confirm the IRS uses debit cards. Larry Benson

    Debit Cards: You can have your federal refund deposited to a debit card set up by a financial organization. The fees and terms vary, but, generally, there is not a charge for purchases. Debit cards can be used anywhere major credit cards are accepted. In some instances, the debit card is tied to your bank account which, in essence, makes them reloadable, (i.e. payroll and other deposits can be routed to the debit card.) Deposit timeframes are generally the same as direct deposit—usually in as little as 10 days.

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