Tax Refund Splitting Provides New Avenue for Fraud Detection

TIGTA found that more than 65,300 bank accounts had multiple direct deposits, accounting for more than 949,000 refunds for approximately $1.6 billion, some of which belong to IRS employees.

What does this mean?  Essentially, this means that 65,300 preparers may be shifting money from his or her client’s refund to the preparer’s own bank account.

What’s the big deal?   Can a tax preparer steal your refund? With or without the client’s permission, it is completely illegal for a preparer to take any part of a taxpayer’s tax refund unless it goes through a bank for legitimacy.

Are you sure it’s all theft?  There is no way to be completely sure. The IRS needs to find a way to ascertain ownership of all the bank accounts. However, if each tax payer is entitled to one refund, or two in cases of amendments, any account having multiple deposits raises a red flag.

What’s the punishment?  Right now, tax preparers who get caught doing this are fined $500 per incident. Depending on the amount of money funneling into his or her personal account and the number of fined instances, this may not really dissuade preparers.  The fines for unscrupulous preparers will be rising.

Is that it?  Nope, it gets worse.  It is suspected that over 200 of the bank accounts in question are those of IRS employees who may be diverting taxpayer refunds into their accounts.

The IRS has woken up, opened their eyes, and began to take action against the people attempting to, and sometimes succeeding in, taking what does not rightfully belong to them. The hand of justice will be swift and decisive.  I can’t wait to watch from front row seats.




Posted: November 16, 2012

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