50,000 inmates claim tax refunds, report no wages(AP)

WASHINGTON (AP) — Nearly 50,000 prison inmates claimed more than $130 million in tax refunds this year without providing any wage information to the IRS, a government investigator says in a report to be released Thursday.

The Treasury inspector general for tax administration stops short of saying the refunds were fraudulently claimed. It does, however, say the Internal Revenue Service should investigate further.

The report is the latest in a series of audits looking at prison inmates claiming tax credits and other government payments. It notes that the IRS identified nearly 250,000 fraudulent tax returns during the 2010 filing season — a 50 percent increase over 2009 — preventing $1.48 billion in fraudulent refunds.

"While the IRS is identifying larger numbers of fraudulent returns, improvements must be made to its screening processes to ensure that returns filed by prisoners get adequate scrutiny," said J. Russell George, the Treasury inspector general for tax administration. "Expanded and expedited access to wage and withholding information would significantly increase the IRS's ability to verify information reported on a tax return when processed, and prevent fraud."

The IRS issued a statement saying the agency takes refund fraud seriously and aggressively fights it.

"The IRS is very successful at detecting and stopping incorrect refunds, including criminal refund fraud, and overall prevents 98 percent of questionable claims from being issued," the statement said.

"The situation involving prisoners is not a simple process, particularly considering the fact that some inmates and their families are legally entitled to tax refunds and that the prisoner population is constantly changing."

The IRS said it works with state and federal prisons to get information about inmates on a voluntary basis.

"However, without congressional action to require state and federal prisons to report the status of inmates to the IRS, there will be gaps in the prison data and compliance problems will persist," the IRS said in its statement.

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