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Tax fraud investigations heat up, IRS chief says

TAMPA — The Internal Revenue Service released a map Thursday that seemed straight from the weather report.

Florida needs a life preserver.

The droplets showed where IRS-Criminal Investigations has been busy putting pressure on identity thieves. Like never before, the agency's enforcement arm is going after people who claim tax refunds under false identities to steal public money.

Nationally, new investigations tripled from 2011 to 2012 and are on pace to break records this year amid a "massive nationwide sweep" in 215 cities, the IRS chief said Thursday.

Steve Miller, acting commissioner, spoke with Florida news reporters by telephone conference call. He warned that thieves are going to prison.

"These numbers show the IRS is very serious about pursuing identity thieves and protecting taxpayers," he said. "We've taken these aggressive actions because we realize how serious a problem identity theft is for taxpayers, for the tax system and for Florida."

The IRS has a history of saber-rattling during tax season to dissuade people from cheating. But there's no denying that in recent weeks, its criminal arm has seen a string of investigations lead to federal charges, some in Tampa.

In the past four months, the agency reports, criminals have been sentenced in 90 cases nationally, and hundreds more court cases are in the pipeline.

"When these individuals go to jail," he said, "they're spending an average of four years in custody. We've seen sentences as long as 262 months nationwide. That's more than 20 years."

He credited the assistance of local law enforcement and the efforts of federal prosecutors.

Identity-related tax fraud has turned up in every state except North Dakota and West Virginia, said Richard Weber, IRS-CI's national chief.

The identity theft map released Thursday placed color-coded droplets on cities that drew enforcement actions in January. Those are milestones on the way to conviction, Miller explained, such as indictments, arrests and search warrants.

On the map, the droplets barely touch the Great Plains. Southern California and the San Francisco Bay area show patches of activity.

The Northeast is awash with droplets. But Florida is nearly hidden by them.

Last fiscal year, IRS-CI opened 204 refund fraud investigations in Florida. That was four times the prior year's total. With eight months still left in this fiscal year, the tally is already at 156.

"I think it's clear that Florida was ahead of the curve for whatever reason," Miller said.

He describes "twin epicenters" in Tampa and Miami and took note that tax fraud had become a street crime. That's been the case in Tampa, where police routinely find refund fraud intermingled with the drug trade.

In the latest national sweep — which targeted 389 people — nearly one-fourth of the suspects were in Florida, and so far, 45 of them have been arrested, he said.

In the long run, the IRS realizes that the solution is in prevention, not detention.

"We will not be prosecuting our way out of this," Miller said. "That's not going to be the answer. We're going to have to make it more and more difficult for criminals to profit from this behavior."

He said the agency is getting much better at detecting fraud by using screening filters that in some cases compare a return with the prior year's data on the same account.

The filters will continue to improve, he said, though he wouldn't disclose details.

During fiscal year 2012, which ended Sept. 30, the IRS stopped 5 million suspicious returns, Miller said, and prevented the issuance of fraudulent refunds totaling at least $20 billion.

"Last year we did a great job; this year we will do a better job because we are learning along the way," he said.

He said the IRS is also working to improve the experience of victims. Personal identification numbers issued to thwart a recurrence tripled this year, he said.

Still, he noted that too many victims wait too long for refunds.

It takes more than 180 days, he said, to resolve an identity theft case. That's because there's a backlog of nearly 300,000 cases in which multiple returns have been filed with the same taxpayer's identity information.

"We're working hard on this," he said. "We closed, last calendar year, well over 500,000 of these cases, so it's a matter of volume, in terms of why there are delays."

He said his heart goes out to victims. He sat recently with workers trying to resolve the cases to hear their stories. He saw people caught up in the system.

"It was a difficult thing to see," he said.

Staff writer Patty Ryan can be reached at pryan@tampabay.com or (813) 226-3382.

Investigations rise

Cases of refund fraud arising from identity theft are increasingly more likely to produce criminal charges. Nationally, prosecutions have risen dramatically since 2010. The fiscal year totals for 2013 reflect only four months of activity in late 2012 and in 2013.

Action FY2013* FY2012 FY2011 FY2010
Investigations

initiated
542 898 276 224
Prosecution

recommendations
441 544 218 147
Indictments/

Informations
353 494 165 94
Sentenced 90 223 80 45

Source: IRS

*Oct. 1, 2012-Jan. 31

Tax fraud investigations heat up, IRS chief says 02/07/13 [Last modified: Thursday, February 7, 2013 11:47pm]

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