When the Fraud Hits the fan

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For many, the thought of tax season does not bring up warm feelings; but for three years, today’s fraudsters turned tax season into a year-round holiday. On October 15, 2015,two defendants from Phenix City, Ala., were sentenced to five-year prison stints for their involvement in a stolen tax identity fraud scheme. WRBL-TV explains that these two fraudsters, and others, stole more than $2.5 million in falsely filed tax returns between March 2011 and May 2014.

The story explains that these two women owned and operated multiple tax preparation businesses, and they filed more than 900 false federal income tax returns, claiming millions in false tax refunds. (This fraudster syndicate literally stole money from taxpayers.) However, these fraudster tax service professionals did not simply steal from their clients. Instead one of the women involved in this scheme obtained stolen identities separately, and then she and her co-conspirators applied for tax returns with those identities through the businesses she co-owned.

Once they received their tax return checks in the mail, the story states that these fraudsters proceeded to cash their fraudulent tax return checks at businesses in Alabama and Georgia. Although combined between them, these fraudsters stole more than $2.5 million from 2011-2014, at least one of the culprits was sentenced to pay the government back. The story notes that one of the women was also sentenced to repay the IRS $734,565 in restitution. (Hopefully she saved some of the haul that she stole.)

This story offers an example of a case where fraudsters simultaneously offer a service to taxpayers while doing a disservice to them. Congratulations to the justice system for catching up to them. It’s safe to say they won’t be peddling tax preparation services to anyone anytime soon.

Source: Today’s ”Fraud of the Day” is based on an article titled, ”Phenix City woman sentenced in $2.5 million stolen identity tax refund fraud ring,” and published by WRBL-TV on October 15, 2015.

MONTGOMERY, Ala. – A Phenix City woman was sentenced to serve five years in prison today for her involvement in a stolen identity tax fraud scheme.

[Another culprit] was also sentenced to serve 60 months in prison to be followed by three years of supervised release and was ordered to pay $734,565 in restitution to the IRS.

According to court documents, between March 2011 and May 2014, Floyd and Davis operated several tax preparation businesses in the Phenix City area, including T & L Tax Service.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.