Last Updated: Fri, 02/04/2011 – 12:29pm
The government agency that’s showered prison inmates with millions in fraudulent tax refunds over the years has been cheated out of $33 million by thousands who “erroneously” claimed credits for alternative and plug-in electric vehicles.
In automatically granting the bogus tax credits the Internal Revenue Service (IRS) was simply following an aggressive Obama Administration plan to reward consumers that purchase the costly “advanced-technology” vehicles. The president is on a mission to get 1 million of the environmentally friendly cars on the road by 2015.
As a result of that push the IRS failed to appropriately scrutinize claims, even when they clearly didn’t meet the criteria. In the first six months of 2010 alone, 20% of such federal tax credits were “erroneous,” costing U.S. taxpayers more than $33 million. Details of this latest IRS gaffe are laid out in a report released this week by the Treasury Inspector General for Tax Administration.
It reveals that the IRS granted the lucrative tax credit—worth up to $7,500—to gas-guzzling sports utility vehicles and even a bicycle. Among those who cheated Uncle Sam are jail inmates and even IRS employees. Some people got multiple tax cuts for the same vehicle and 29 prisoners received nearly $50,000 in alternative vehicle credits even though they were behind bars.
Speaking of jailed convicts, the IRS has for more than a decade cut checks to incarcerated criminals who clearly didn’t qualify for tax refunds. In 2010 over a quarter of a million prisoners filed tax returns and nearly 50,000 claimed more than $130 million in refunds without bothering to report wage information.
In a report published just a few months ago, the Treasury Inspector General found that 88% of the 287,918 returns filed by prisoners in 2010 were not selected for screening by the IRS. Investigators found that the agency seldom screens the returns of those most likely to commit fraud.
Previous inspector general probes have exposed the perpetual problem over the years and the IRS has failed to act. As far back as 2005 the Treasury watchdog ordered the IRS to stop the millions of dollars in fraudulent refunds paid to prisoners. That probe determined that refund fraud committed by prisoners increased at an alarming rate of 318% from the previous year.