Prison and Restitution for Tax Refund Fraud


Between now and April, millions of Americans will file their tax returns. Unfortunately for some, fraudsters will beat them to the punch and steal their hard-earned cash. As with most things in life, knowledge is power – Americans need information about how fraudsters will try to scam them. According to the Journal Sentinel, the Internal Revenue Service (IRS) has undertaken a national effort to educate taxpayers about ways they could potentially be scammed.

The IRS kicked off the effort by releasing its list of the ”’dirty dozen”’ ways people commit tax scams. ”Identity theft, phishing and fraud” topped the list for 2011. The government is working to make sure taxpayers are not bated into scams and those ”phishing” are fined accordingly for their illegal activities. Phishing – involves Internet fraudsters who send spam or pop-up messages to lure personal information.

The IRS also is cracking down on scammers. For example, the article reported that the government pursued charges against two Milwaukee women who filed over 170 fraudulent returns worth more than $1.5 million. So, how did they do it? The two filed ”false tax returns for friends, relatives and others. The filings listed false employment, income, dependents, tax withholdings and estimated tax payments.”

Now they are going to prison. A federal judge sentenced one woman to ”46 months in prison and $450,000 in restitution to the IRS and another to serve two years in prison and to pay $70,000”. (This means they collected 1/3 of the requested refunds. Not a bad rate of return.)

Alerting Americans to the ways fraudsters are scamming the public, targets fraud that hasn’t happened – yet. Aggressively prosecuting scammers puts potential fraudsters on notice that they will be pursued for committing fraud. These are good first steps. But, I wonder? how are we catching those who are committing fraud now?

Source: Today’s ”Fraud of the Day” is based on an article entitled, ”2 Milwaukee women sentenced for 170 false tax returns” written by Marissa Evans and published by the Journal Sentinel on March 4, 2012.

Two Milwaukee women were sentenced last week to federal prison and ordered to pay thousands of dollars in restitution to the Internal Revenue Service after convictions for tax fraud.

Roshunda Smith, 34, and Linda Fay Townsend, 46, attempted to receive refunds by filing false tax returns for friends, relatives and others. The filings listed false employment, income, dependents, tax withholdings and estimated tax payments.

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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.