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Nazareth, Pa., United States

Thursday, January 31, 2013

Dent, Gerlach and DAs Take Aim at Tax Fraud Scam

Synopsis: A multi-billion dollar tax return fraud scam is being run by identity thieves. The Lehigh County DA and the Berks County DA have been fighting this scam and they say it’s about time the IRS got into the game. Charlie Dent takes action. He’s introducing a straightforward bill that asks the IRS to double-check their data before issuing bogus tax refunds – thus saving billions of tax dollars and saving local law enforcement from expending resources they don’t have.

The Scam

- Perpetrators buy lists of personal identification information for Puerto Rican citizens who are not required to pay federal income tax
- Puerto Rican citizens only need to file a U.S. federal income tax return with the United States if they have earned income in the continental U.S. or if they are employees of the U.S. Government
- Fraudulent federal tax returns are prepared and filed using the stolen Taxpayer Identification Numbers (TIN)
- In some cases perpetrators solicit the help of U.S. mail carriers to intercept the fraudulently issued tax refund checks
The tax refund checks are cashed at one-stop check cashing establishment

The Impact (Facts and Figures):

- The tax returns are usually around $5,000 to $7,000
- A single Social Security number from Puerto Rico goes for about $8-$10 on the black market.
- This fraud scheme appears to be in the billions of dollars
- In 2011, the IRS reported 938,664 fraudulent returns related to identity theft totaling $6.5 billion, and 582,000 taxpayers who were the victims of identity theft

The Solution:

“Local law enforcement personnel are being forced to dedicate time and resources to combat a crime that is occurring because of data management issues at the IRS,” said Congressman Charlie Dent at a news conference yesterday, in which he as joined by Congressman Jim Gerlach and District Attorneys Jim Martin (Lehigh) and John Adams (Berks). “H.R. 353 requires the IRS to devise a system that will determine if a citizen has filed a U.S. federal income tax return in the United States and in another territory or possession under the same taxpayer identification number. This would stop the potential for fraud at the source.”

The Big Picture:

“We are dealing with big issues in Washington right now," states Dent. "Our debt stands at nearly $16.4 trillion and our federal deficit has exceeded $1 trillion for the past four years. To get our deficit under control, we are going to have to make tough but smart decisions about our spending priorities. We are going to have to take steps to protect and strengthen our entitlement programs. We are going to have to identify and address waste, fraud and abuse. We can save billions of dollars right here. This is a small but important step in righting our fiscal trajectory and protecting our citizens."


Anonymous said...

And the IRS is now responsible for administering our health care system. Great. Take a look at your W-2 this year. There is a reason why your health care costs are now being reported. No Democrat should ever be elected again.

Peter J.Cochran said...

Bernie,It is going to be a good day, so good day to you and my fellow AMERICAN PATRIOTS regardless of party, that pay TAX.We stand together or will hang separably. First of all,I can not believe the technology dudes can not figure the head end of this BS.on your web. Anyhow, could someone retire , move in to PR. ,or sort of on paper, and avoid federal taxes on retirement income? Has no one figured out to check if funds were 1st sent to the IRS in a given tax year BEFORE they refund non-exist contributions.They should run these jokers down and HANG THEM first before we are all completely bankrupt for ID theft and that would slow down the fraud.

Alan Earnshaw said...

Only in Washington is $6.5 billion a "small" step.

Anonymous said...

Let me get this straight....A new Bill (LAW) needs to be passed that would require the IRS to Double check DATA, before the issue a refund...this isn't done now?.....Federal Government at WORK!!!

Anonymous said...


Anonymous said...

Add an Amendment to the BILL, establishing a Cabinet Post and enforcement Unit to watch and monitor the IRS, to insure that they do the JOB properly.

Alan Earnshaw said...

For those wondering about the data validation, employers are required to send W-2s to their employees by Jan. 31. They are required to submit them to the government by Feb. 28. Smaller employers are allowed to file paper copies; larger employees must file electronic data files. The data files can be read directly into IRS computers; the paper copies need to be scanned and run through Optical Character Recognition software or entered manually.

If you want to ensure the IRS cross-checks against the data before refunds are issued, that means you won't be able to get a legitimate refund of your money (overpaid taxes) until sometime in March at the very earliest. Considering the amount of scanning and manual data entry involved, it could be several months longer. Do you think a few members of Congress would hear from their constituents if they had to wait 4-5 months after filing their tax returns to receive their refunds?

To speed up the process, we could let the IRS hire a huge seasonal workforce for 2-3 months of each year, undergo massive training costs, endure the large number of errors that seasonal workers/temps are likely to make as they learn their jobs, fight with the IRS to resolve errors they make in our records, and risk delaying our refunds even longer while the investigation unravels and corrects the problems.

There are a few steps they could take right away, like ensuring that a single social security number is only used once and requiring direct deposit of tax refunds into a bank account, but to really solve the problem is probably not feasible without significant extra reporting burdens placed on businesses (such as quarterly reportings of earnings to the IRS).

As long as we rely on an income tax, these are the sorts of issues we have to consider. I don't think there are any easy answers.

Anonymous said...


I think I understand your point. You hinted concern about reliance on an income tax. I agree!

We MUST replace income taxation with sales taxation. There are NO loopholes when you assess on sales! ALL money is eventually SPENT. That includes every illegal device known to man!

Here's the concern, however. Moving to a sales tax focus MUST only be in replacement of income taxes. Given today's "handout" society, income taxation is unfair to those who actually work.

Peter J.Cochran said...

See Bernie, you have real intel on the IRS details now It appears several folks, local perhaps who are real smart , and know more than me are contributing to your subject matter.Thank you again., I This is how I learn too. Beats picking up dead beats for traffic violations and beating up the spouse , new thought process is good.Thanks Bernie for your generation of idea trading.

Peter J. Cochran said...

INCOME TAXATION IS UNFAIR!Too many babies daddies at driving luxuries.Too many unemployed have given up , sitting home watching Judge Judy and Truth of Consciousnesses re-runs. DOING NOTHING and get getting paid.Make the consumer of high def tv pay taxes and the guy who got 4 million to sing a song.Want the CD ? Pay the Tax on it. Make it consumer tax, weight it by a real need index, and tax the piss out of shit like old Micheal Jackson cds.

kareenofbuckwheat said...

wouldn't just be easier to get rid of the ricans?

Bernie O'Hare said...

How 'bout we just get rid of you?

Bernie O'Hare said...

I deleted on OT comment about John Stoffa's Human Services building. I have devoted several bogs to that topic and will do so again. It is extremely rude to push your anti-Stoffa agenda on a topic having nothing to do with him, but that's what I expect from the haters.

Anonymous said...

I see you got this under control. There were more than a hundred spam posts this a.m. when I tried to admit Mr. Powerful's heart is actually in the right place here.

"A" for effort, but the focus should be on changing the tax code and dismantling the wasteful, inept and immoral IRS. This is a band-aid. It is not a bad thing, but it is no substitute for bigger thinking.


Bernie O'Hare said...

Yes, Tricia Mezzacappa has been attempting to hijack this blog since Monday night.

Anonymous said...

NERO (DENT) fiddles, while Rome(USA) Burns!

Anonymous said...

Give Puerto Rico Independence and the problem is solved...and no Foreign Aid.