Tax State Level

What We Know Refund Fraud is Exploding Every State is being Hit (so is the IRS) Fraud is Easy Fraud Schemes are Ever Changing States Need to Change Priorities

Refund Fraud is Exploding E-File + On-Line Banking + ID Theft + Pre-Paid Debit Cards = TAMPA, FLA. TAMPA TRIBUNE Sept 2, 2011 –Tampa is at the tip of a national trend –Postal Inspectors seized an estimated $100 million in fraudulent tax refunds –The total fraud in the Tampa area alone could approach $1 billion.

Refund Fraud is Exploding E-FILE & PREPAID DEBIT CARDS –Has Increased Identity Theft –On-line Banking allows for Complete Anonymity –Has Created a 24/7 Window for Perpetrators –Fraud Starts 1 st day and extends beyond Filing Deadline –Speed & Volume of Fraud Returns Overwhelming

Every State is being Hit 2010 YTD MA Inactivated EIC claims – 14,539 RETURNS – $7,956, Total EIC Claims Inactivated all years –70,398 Returns – $35,122,280.00

Every State is being Hit MA 2010 Withholding Inactivated –YTD 5,208 Returns $4,527, –Total Withholding Inactivated all years 42,272 Returns $30,397, E- file Columbus Bank –Stopped apx returns = $1M (+/-) What We Missed –? $$$$$

Fraud is Easy Free Tax Prep Sites Genealogy Sites that provide –Names –Dates of Birth –Dates of Death –SSN Numbers Automated Refund Phone Line

Fraud Schemes are Ever Changing Tax Preparer Fraud –Wholesale solicitation of elderly living in subsidized housing to file for refundable credit – Submission of False and Fraudulent returns Submitting returns of former clients and routing returns to bank accounts controlled by preparer Submitting same return under ITIN & SSN Submitting Prior Year returns

Fraud Schemes are Ever Changing Return enhancement, Incorrect Filing Status Multiple Returns using the same SSN for dependants Overstated Income to max out EITC Overstated Schedule C expenses Claiming Credits that they’re not entitled to Creating false supporting documentation on Audit

States Need to Change Priorities No Longer a Secondary Filing Season Issue Continuous Revision of Fraud Rules Coordinated Effort Within DOR Prosecute Perpetrators

THANK YOU Questions ??? Joseph J. McDermott Deputy Commissioner, Audit Division Massachusetts Department of Revenue 200 Arlington Street, Chelsea, MA (617)