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Waste Watch: IRS refunds worth $4 billion hijacked

Updated: Wednesday, July 10 2013, 02:51 PM EDT

Rochester, NY - Scam artists are hijacking tax refunds to the tune of $4 billion dollars. 

They cash in on your tax dollars, then the IRS must pay out again to the people who are legitimately owed government refunds.

“We were hoping to buy a flat screen TV,” said Debbie Ryan.  

For the first time in some time, she and her husband are expecting a tax refund.

“It’s like found money,” she said. “Normally we have to pay.”

Yet, nearly one point five million people who are expecting a refund will learn instead their money has already been paid out to identity thieves who use stolen financial information to file a tax return.

“Before anyone finds out, they will have your refund loaded on a debit card and will have spent the money,” said David Young, a Certified Public Accountant.

It has happened here in Rochester.  The FBI says 25 year-old Juan Marie Delvalle had dozens of refund checks sent to a home on Karnes Street in the city, and dozens more to a home on Lime Street.

How Many checks?

According to court papers: 590 separate checks totaling more than $3.3 million dollars. 

The staggering number is not unusual.

“They will file thousands of returns, they are in the business of stealing people’s identities,” says Investigator Tim Shanahan of the IRS Criminal Division.  He said Delvalle was recruited by a larger fraud ring based in the Bronx.

Anyone who has been the victim of identity theft at any time is vunerable.  “They can use it for anything.  To get credit cards, to get loans, and now more often to file false tax returns in your name,” said Inv. Shanahan.

“I never realized that someone could do that,” said Debbie Ryan.  “That really does surprise me.”

Ryan learned she is at risk because she has had her identity stolen in the past.  “They charged up $300 dollars worth of groceries in Germany.  It was really stressful,” she said.

Because the incident occurred more than 7 years ago, her risk of further exposure is relatively low.

CPA David Young said he has helped clients who have been scammed appeal to the IRS to obtain the refunds they have legitimately earned.  “Ultimately you’ll get your refund, but now the Treasury has paid out twice on that same refund.”

The IRS recognizes a lot of taxpayer money is being wasted and is doing something about it.  The number of criminal investigators working to expose identity theft was doubled last year to 3-thousand.

More cases are being referred for prosecution including 441 in the month of January alone. 

In January, Juan Maria Delvalle pleaded guilty to tax fraud conspiracy and faces up to 10 years in prison.

The efforts have stopped $20 billion in false refunds from being paid out in the last year alone. 

“That is taxpayer money and that is why we take this very seriously,” said IRS criminal investigator Shanahan.


Waste Watch: IRS refunds worth $4 billion hijacked

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