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The Bottom Line on Tax Fraud? $5 Billion per Year

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The United States Treasury Department's Acting Deputy Inspector General for Audit just released a lengthy report about the extent of income tax fraud in the U.S. The audit was conducted as a direct result of the Senate and House hearings we have been watching over this past year. Their findings are stunning. You can read the report here. Surely the subcommittee chairs will move their legislation (H.R. 6205 and S. 3432) out of committee with a favorable report with the support of the audit results.

Between 2010 and 2012, the fraud more than doubled from 440,581 instances to 1,125,634 instances "meeting the characteristics of confirmed identity theft cases." In 2011, these returns amount to $5,221,018,184 in potentially fraudulant payments.

Much of this fraud is apparently generated by criminal groups. It is significantly limited geographically. The report provides the following table. The addresses in the table are unique residential addresses. Five homes in the U.S. received almost five thousand returns for more than eight million dollars.

Figure 3:  Top Five Addresses Used to File
Potentially Fraudulent Tax Returns

Address

Number of Tax Returns

Refunds Issued

Address 1 in Lansing, Michigan

2,137

$3,316,051

Address 2 in Chicago, Illinois

765

$903,084

Address 3 in Belle Glade, Florida

741

$1,004,897

Address 4 in Orlando, Florida

703

$1,088,691

Address 5 in Tampa, Florida

518

$1,791,770

Total

4,864

$8,104,493

Source:  TIGTA analysis of TY 2010 tax returns.

Because this fraud is used as the reason to close access to the Social Security Death Index, it is important for genealogists to understand the extent of the fraud. The report details conditions in the handling of information at the Interal Revenue Service itself that contribute to the many fraudulant payments. As the following table shows, stealing the social security numbers of deceased individuals is only the tip of the iceberg.

Figure 5:  Analysis of Potentially Fraudulent Tax Refunds for TY 2010

Type of Individual

Number of Tax Returns

Refunds Issued

Deceased 

104,950

$415,047,568

Elderly

76,338

$374,419,730

Citizens of U.S. Possessions

67,789

$387,183,428

Students (ages 16 to 22)

288,252

$695,343,022

Children (under age 14)

2,274

$3,960,327

Income Level Does Not Require Tax Return Filing

952,612

$3,345,064,109

Total

1,492,215

$5,221,018,184

Source:  TIGTA analysis of TY 2010 tax returns.

Those genealogists whose livelihoods or volunteer work depend on access to the SSDI should consider communicating with their own Congressmen and Senators. Work of this type includes those who work to return the remains of Missing or Killed in Action servicemen, those who seek the next-of-kin for Unclaimed Persons, and others in similar compassionate roles.

Explain why access to the Death Master File is critical to your work and ask your legislator to contact the House and Senate subcommittee chairs with the message to add investigative genealogists to the list of credentialed people. The current bills open the records only to those stopping fraud. Our compassionate work needs to be recognized. We were denied the opportunity to testify at any of the subcommittee hearings. Our own legislators are now our only path to having our voices heard.

I suggest you, as taxpayers and genealogists, read the report. The full URL for the report is:
http://www.treasury.gov/tigta/auditreports/2012reports/201242080fr.html

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Barbara serves as the Federal Records Director. She is a Board-certified genealogist who works for the Massachusetts Society of the Colonial Dames of America as a Verifying Genealogist and for the Welles Family Association as a Genealogist. Her volunteer service includes a stint as President of MGC. She holds a master’s degree in the management of non-profits from the Florence Heller School at Brandeis University. You can read her own blog, The Demanding Genealogist, at blog.demandinggenealogist.com.

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  • Guest
    Polly Kimmitt Tuesday, 07 August 2012

    That's incredible, Barbara! Thank you so much for posting this!

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