Tax Refund Fraud

Directive 144 delegates the USAO with the following authority:

1) Open certain GJ investigations in all SIRF matters 2) Federally charge by criminal complaint a person engaged in a SIRF crime 3) Seek and obtain a seizure warrant for forfeiture of criminally-derived proceeds arising from SIRF crimes, all without approval of DOJ tax

Subject uses stolen personal information without permission to file a fraudulent tax return in an effort to illegally obtain tax refunds

Identity Theft

The filer of the SIRF tax return with the IRS

Preparer

Requires ISP to save records for the subscriber of a given IP for 90 days

Preservation Letter

The types of cases outside the scope of Directive 144 include:

- Culpable person files fraud claim for refund using own SSN but claims false dependency using another SSN - Return preparer alters the return of a client with/without consent to claim higher refund - Return preparer and client conspire to file false return claiming an inflated refund - Return preparer uses clients PII without clients consent, with another client to file a false claim for a refund

What are some common victim characteristics for Identity Theft?

- Elderly - Disabled - Institutionalized - Prisoners - Homeless - Deceased - Children

What are the common fraud indicators of QRP?

- Handwritten/altered/false forms W-2 & 1099 - Excess withholding in comparison to wages - Invalid/Mismatched SSNs - Extensive use of substitute W-2s - Signed by preparer or "self prepared" - Returns are completely false/fabricated

Where do criminals get their sources of mass identities for Identity Theft?

- Hospital/Doctors Offices - Large employers - Universities

What ares some common characteristics/indicators of Identity Theft?

- Large volume of treasury checks going to the same address - Large volume of prepaid debit cards going to the same address - Multiple tax refunds going to the same bank account/debit card - IRS notices

What are some examples of information provided by the SDC?

- Number of returns in scheme pattern - Amount of refunds claimed/stopped - Bank account/Routing Information - EFIN/PTIN applications - Certified Tax Returns

What are the common fraud indicators of RPP?

- Unscrupulous return preparer - Fictitious/ Questionable Schedule A or C deductions/expenses - Incorrect SSN, HOH filing status, false Earned Income Tax Credit - Income is usually legitimate - Charge large fees or percentage of refund - Return is signed by preparer

The information needed to identify the filer of an electronic return include:

1) IP address 2) IP date 3) IP time 4) IP time zone

What are the 3 sources of QRP/RPP Investigations?

1) Law Enforcement 2) Informants 3) Financial Institutions

The types of cases within the scope of Directive 144 include:

1) PII stolen from a non-culpable person and then used to make a fraudulent claim benefitting someone other than the PII 2) Unaware their information is being used to make a false claim 3) Return preparer makes a fraudulent claim using non-client PII 4) A culpable person receives/endorses/negotiates a refund check 5) A culpable person receives/possesses/transfers fraud refunds in bank accounts or through prepaid debit 6) A culpable person makes ATM withdrawals from prepaid debit cards loaded with refunds

What are the 3 different types of tax refund fraud?

1) Questionable Refund Program (QRP) 2) Return Preparer Program (RPP) 3) Identity Theft/SIRF

What are 3 special investigative techniques used in QRP/RPP cases?

1) RPP shopping 2) Limited Undercover Contact 3) Decoy Checks

What are the 4 Identity Theft Roles?

1) Source 2) Preparer 3) Runner 4) Ringleader

Stolen Identity Refund Fraud (SIRF) cases are guided by Directive ____.

144

What are the common charges under Identity Theft?

18 USC 1028(a)(7) - Identity Theft 18 USC 1028A - Aggravated Identity Theft

What are the criminal charges for SIRF?

18 USC 286 18 USC 287 18 USC 1028(a)(7) 18 USC 1028A

What are the common charges under QRP?

18 USC 286 - Conspiracy 18 USC 287 - False, Fictitious, or Fraudulent Claims

What are the common charges under RPP?

18 USC 371 - Conspiracy 26 USC 7206(2) - Aiding and Assisting in the Preparation of a False Return (Return Preparer) 26 USC 7206(1) - Subscribing to a False Return (Client)

Allows CI to use Title 18 forfeiture provisions in certain tax cases where proceeds from ID under QRP scheme are identified and tied to the assets

Directive 128

Allows the government to send Preservation letters to ISPs, requesting that the IRSP preserve the user ID records associated with an IP address for a particular date and time

Electronic Communications Privacy Act (ECPA)

Represent the "worker bees" of the SIRF scheme, gathering identity documents, identifying personal details, or collecting proceeds

Runner

Responsible for detecting refund fraud and conducting ID theft prevention measures

Scheme Development Center (SDC)

This person obtained or procured stolen identity information

Source

What is the objective for RPP?

To identify and pursue investigation of abusive return preparers

What is the objective for QRP?

To identify fraudulent returns