Tax Fraud: IRS Could Issue $26 Billion In Tax Refunds To Fraudsters Over Next Five Years

In the battle between the Internal Revenue Service and identity thieves, the thieves are winning.

In the next five years, the U.S. may issue as much as $26 billion in tax refunds to fraudsters that engaged in identity theft, according to Congressional testimony made on Tuesday by J. Russell George, the Treasury Department's inspector general for tax administration. (H/t The Washington Post.)

This scam involves fraudsters who steal people's identities in order to file fraudulent tax returns and claim refunds on their behalf. Of the 2.2 million fraudulent tax returns the IRS received in 2011, 940,000 returns were associated with identity theft, according to George's testimony.

This type of fraud is a growing problem for the IRS. Over 640,000 taxpayers were affected by tax fraud in 2011, more than double the number of taxpayers affected in 2010, according to statistics provided by George cited by the Wall Street Journal.

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Legitimate tax refunds have been delayed because of growing identity theft and tax fraud, The Huffington Post reported in April.

Andy Armas, one Connecticut resident, found out his Social Security number and $2,000 tax refund were stolen this year when he tried to file his taxes, but the IRS said someone else already had filed his taxes, according to NBC Connecticut.

Some scammers work on a massive scale. One tax refund scammer allegedly stole 300 taxpayers' identities, according to Reuters.

Two former NFL football players recently were arrested for tax fraud, according to the Miami Herald.

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