IRS Sent out $5.8 Billion in Refunds to Criminals

The IRS is woefully behind the credit card companies in combating identity theft. A January 2015 report issued by the GAO ( United States Government Accountability Office)  reported that $ 5.8 billion dollars were sent out to identity thieves during the 2013 tax season. The report also concedes that the IRS sent out an unknown number of refund check that weren’t detected. To be fair, the IRS also stopped 24.2 billion in checks from going out that were flagged as suspicious. In my humble opinion, the credit card companies have been so much more pro-active and on top of this problem, while the IRS seems years behind. A huge problem is that the IRS is unable to verify documents filed by taxpayers in real time. For example: an identity thief can file a return with a completely made up W-2 to claim a refund of a few thousand, and many times, the IRS will issue the check. Its not until after tax season, that the IRS actually catches the mistake, and realizes that the W-2 was completely false. The information from the tax documents entered isn’t verified until several weeks later, after the shyster has received their fraudulent refund. Clearly, if the IRS can implement a way to verify the accuracy of tax documents in real time, it would prevent many false refunds from being issued.