In addition, TIGTA found that the majority of tax returns the IRS identifies as being filed by prisoners are not being sent to screening to assess fraud potential. Our review identified 253,929 (88 percent) of the 287,918 tax returns filed by a prisoner as of March 24, 2010, were not selected for screening. Of those tax returns not screened, 48,887 individuals had no wage information reported to the IRS by employers. These 48,887 prisoners claimed refunds totaling more than $130 million including Earned Income Tax Credit (EITC) claims of $78.5 million. Some of these refunds may have been stopped by other compliance activities. For example, TIGTA determined that the IRS prevented the issuance of nearly $18.1 million in EITC claims for 4,532 of the 48,887 prisoner tax returns.
In Fiscal Year 2005, the Treasury Inspector General for Tax Administration conducted an audit to determine the effectiveness of IRS procedures for detecting potentially fraudulent prisoner refund tax returns. Our review concluded that there may be other fraudulent prisoner tax returns of which the IRS is not aware. The total number of tax returns screened is based on two factors: 1) the likelihood that fraud is present and 2) the availability of resources to work the cases. Each refund tax return is given a “data mining score” based on certain criteria. The higher the score, the greater the chance the refund could be fraudulent. The Criminal Investigation Division also used other criteria to screen tax returns. The number of tax returns screened is based on these criteria and the resources available. If a tax return filed by a prisoner does not meet these criteria, it will not be reviewed to determine if it is fraudulent. The IRS continues to identify tax returns filed by prisoners during tax return processing. However, the IRS has established selection criteria that result in the majority of these tax returns never being sent to screening to assess fraud potential.