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Senator Introduces Bill to Prevent Prisoners from Collecting Tax Refunds

August 16th

United States Senator Mark Pryor recently introduced legislation to prevent prison inmates from collecting tax refunds. It has become an increasingly common practice for prison inmates to fraudulently collect undue tax refunds.

At present, the IRS pays out millions of dollars in refunds every year to inmates, despite the tax code explicitly prohibiting prisoners from receiving tax credits.

According to a 2010 Treasury report, prisoners filed more than 54,000 false tax returns in 2009 alone, totalling over $39 million in mistakenly paid refunds. Though most fraudulent returns are caught, these figures demonstrate the continued costly nature of these scams.

Most commonly, prisoners will search the internet for listings of businesses that have filed for bankruptcy. Listing a defunct company as an employer on a false tax return form makes it especially difficult for the IRS to verify the claim.

Tax Fraud Prevention Act

Senator Pryor’s Tax Fraud Prevention Act improves information-sharing between the Internal Revenue Service and the Federal Bureau of Prisons and State prison authorities, to aid in the prevention of tax fraud.

This act will ensure that the taxpayer identification numbers belonging to prison inmates are routinely cross-referenced with Federal tax returns before a refund is issued. In addition, the IRS will provide the prison authorities with a list of inmates that have previously tried to defraud the government. This will make it possible for states to take more effective legal action against such prisoners.

Lastly, the legislation makes permanent the authority of the IRS to share certain tax return information with prison officials. This power would otherwise expire at the end of 2011.

Senator Pryor estimates that through the prevention of fraudulent tax refunds, this legislation will save taxpayers $134 million over the next ten years.


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