Audit: More work needed to keep refunds from prisoners

The agency’s 2012 prisoner file had roughly 2.8 million records, with about four out of five matching files at the Social Security Administration. But around a half million records were either missing key information or did not match the SSA’s records. 

IRS officials also cannot discuss any inconsistencies with prison officials once they find out that their prisoner file and SSA records don’t match up. A 2008 law that allowed the agency to disclose a prisoner’s tax information to federal or state authorities if the prisoner filed a false return expired at the end of 2011. 

With all that in mind, the tax administration inspector general called on Congress to pass legislation that would give the IRS permanent authority to share information on prisoners that file false returns, and recommended that the IRS boost its oversight of its prisoner file.

In its response, the IRS said that keeping its prisoner file up-to-date was made more difficult by the sheer number of jurisdictions involved in finding and verifying data. 

The IRS also issued, on a percentage basis, far fewer fraudulent refunds in 2010. That year, the IRS issued $35.2 million in false refunds, out of a total of $757.6 million in claimed refunds – meaning around 4.6 percent of the claimed fraudulent refunds were issued.

But the year before, the IRS had issued $39.1 million out of a total of $295.1 million in claims – a 13.2 percent clip. And in 2004, the IRS issued about 20 percent of the total refunds claimed.