The Treasury Inspector General for Tax Administration (TIGTA) recently reviewed the IRS’s handling of fraudulent returns filed by incarcerated individuals. According to TIGTA, some 17,000 incarcerated individuals claimed potentially fraudulent refunds worth $48 million.
TIGTA reported that returns frequently are not supported by third-party income documents. In other cases, the IRS failed to evaluate returns for potential fraud. TIGTA recommended that the IRS develop a master list of prison institutions nationwide for use in verifying prison institutions’ compliance with reporting requirements. TIGTA also recommended that the IRS consider a legislative proposal to allow it to provide mismatch records to prisons.