With the millions of individual, business, estate and other tax returns filed with the IRS all year round, you might wonder how the agency could possibly find out if a taxpayer’s refund claim is bogus. Whether the excessive refund claim is due to a taxpayer’s error or an intentional fraud scheme, the numbers within the tax return probably add up, after all. Isn’t spotting a questionable refund request a bit like finding a needle in a haystack?
In an effort to avoid paying mistaken or fraudulent refunds, in 1977 the IRS set up its Questionable Refund Program, or QRP. As a result, a Questionable Refund Detection Team has been set up at each of the IRS’s 10 campuses that processes individual tax returns, and teams focusing on business returns have been put into place at the Cincinnati and Ogden, Utah, campuses. Their goals are to:
- Identify returns that mistakenly or fraudulently claim excessive refunds.
- Stop the payment of improper refunds.
- Refer apparent mistakes to the adjustments section or other IRS divisions for appropriate civil action.
- Refer any fraudulent refund schemes identified to an IRS Criminal Investigation field office for additional investigation and/or criminal charges.
The QRP relies on both manual and computerized screening to identify questionable returns, but it receives much of its information from tax return preparers, financial institutions, e-filing origination companies and concerned citizens.
If a questionable return is considered potentially criminal, Criminal Investigation will subject it to additional scrutiny, including through its notorious Electronic Fraud Detection System, which uses sophisticated data analysis to identify tax returns that deviate from the expected.
Not only may a questionable refund request turn out to be a crime, it may also be a red flag for identity theft, according to the IRS. This is because the Identity Theft and Assumption Deterrence Act of 1998 defines identity theft pretty broadly -- knowingly using or transferring another person’s ID, unlawfully and with the intention of committing, aiding or abetting any federal crime or any state felony.
If you’re unsure about whether your individual or business refund request is questionable, or if you have been contacted by the IRS Criminal Division, it’s important to consult a tax attorney right away.
Source: IRS.gov, “Questionable Refund Program (QRP) - Criminal Investigation (CI),” page last reviewed or updated Oct. 16, 2014
