$21 Billion Predicted in Tax Fraud in the Next 5 Years

We’ve recently written about the devastating consequences taxpayers can face after making simple errors on their taxes. For those who purposely scheme to avoid their taxes or receive more back than they deserve, the court is simply not willing to let you get away with it.

Richard Kellog Armstrong, age 77, had received over $1.6 million in tax fraud and then proceeded to hide the proceeds in offshore bank accounts. Meanwhile, he recruited assistance and promoted the scheme.

District Court Judge Robert E. Blackburn took no mercy when sentencing Richard Kellogg Armstrong, age 77, to a full 108 months in federal prison and three years of supervised release following. The sentence was ordered to follow a 660 day prison term. In addition to Armstrong’s $1,021,500 in fines as punitive sanctions for 10 acts of contempt in court, Judge Blackburn also ordered Armstrong to pay $1,678,834 in restitution to the IRS as well as forfeit two residences and a personal airplane.

The Justice Department believes this case is perfect evidence that those who defy lax laws by preparing ludicrous or frivolous tax returns will be prosecuted and, without a doubt, punished for their tactics. IRS Criminal Investigations Chief, Richard Weber, also believes that this case highlights that the IRS will not give up on their hunt for individuals who attempt to cheat America’s tax system.

Tax professionals believe that over $5.2 billion of U.S. taxpayer money may have been paid out this past year in fraudulent tax refunds to individuals who filed about 1.5 million fake returns. It is likely that scammers like these will be able to rip off another $21 billion in the next five years.

These scammers steal taxpayer information from sources like lost or stolen wallets, data on computers, or in workplace files.

The IRS is, however, catching some of the fraud. They spotted about 940,000 false returns from 2011 and, therefore, did not pay back $6.5 billion in fraudulent returns. The IRS is also using red-flag filters to help them spot likely tax-return fraud as well as pin numbers applied to theft victims to help prevent future tax return fraud.

The Treasury Inspector General for Tax Administration claims that despite the preventive actions of the IRS, they cannot prevent billions more from being wiped out in fraudulent refunds in upcoming years. Therefore, although there is no way to prevent yourself from tax-related theft, there are steps you can take to make your data safer. This problem clearly isn’t going right away so the sooner you can take action, the better.

Listed below are various ways to protect yourself:

File your tax return early: Since usually, fraudulent tax filers will file their returns early, in order to beat the legitimate filing, it’s best for you to beat the criminals at their own game. A tax lawyer can help you file your returns early and effectively.

Pay attention and respond to IRS notices: Often when your identity is stolen you may receive a few warning signs from the IRS. If you receive a notice that says you failed to report wages at a company where you never worked or that your return was rejected, contact a knowledgeable tax attorney or the IRS immediately.

Don’t ignore safety tips: You’ve probably heard them all before. Use strong, difficult passwords and change them often. Check your credit reports. Shred your financial documents. Use and update your anti-virus software. Have an IRS tax attorney on speed dial.

Encrypt sensitive financial documents: If you store documents on your computer, they should be encrypted. Also, a CD or external hard drive might be a better choice. Make sure to encrypt documents before they are emailed and that your wireless connection is encrypted as well.

Resist giving out SS#:Make sure you know when a social security number is legally required. Try and avoid giving it out unless completely necessary.

A knowledgeable tax attorney can assist you in avoiding identify theft and even from being accused of any fraudulent claims. The IRS is not giving up on their hunt for those attempting fraud in any way, nor will they overlook any irregular claim.


Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

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