I-Team: IRS needs new rules to stop inmate tax scam

I-Team: IRS needs new rules to stop inmate tax scam


by STUART WATSON / NBC Charlotte

Bio | Email | Follow: @stuartwcnc


Posted on April 9, 2013 at 4:58 PM

Updated Tuesday, Apr 9 at 6:19 PM

If you’re filing your taxes this week and hoping for a refund, you’re not the only one. Thousands of prison inmates have filed phony tax returns asking for refunds they’re not due.

The Inspector General of the U.S. Treasury Department estimates the scam cost honest taxpayers more than $100 million last year. That’s after the IRS caught a quarter million bogus returns and stopped payments of more than $2 billion.

For the better part of a decade the NBC Charlotte I-Team followed the case of a South Carolina prison inmate who testified before Congress about the scam. Now our colleagues at NBC in the San Francisco Bay area have interviewed the Inspector General about how to stop it.

Dwayne Selvey spent 20 years in prison in South Carolina for burglary, larceny and arson he committed as a teenager. From 1991 to 2001, Selvey filed hundreds of fake tax returns, for himself, his family and other inmates. His first check was for $3.

“It did surprise me,” Selvey said. “I said that’s pretty good.”

He’d use a real name and a real Social Security number, but would make up an employer and type up a W2 form inventing wages that were never paid to get refunds that were never due.

“I don’t feel right that I was scheming and scamming these people’s money,” he says now.

 He served five years in federal prison for the scam and only recently was released in the upstate of South Carolina. He says he’s gone straight. But the tax scam has only gotten bigger without him.

“It is a serious problem and a growing problem,” said J. Russell George, the Treasury Inspector General, who has battled the inmate tax con for years.

“We’re still talking over $100 million going to people incarcerated and 99.9-percent are not entitled to it,” he says.
George says Congress has taken some steps to clamp down on the scam, and the IRS is catching many more fake returns before refunds are issued, but the scheme is growing.

The Inspector General wants Congress to change the law to make it easier for the IRS to share data with state and local law enforcement to determine who is in prison and when.

“An honest hardworking taxpayer should not have his or her burden increased by someone cheating the system,” George said.

But, he says the IRS is caught between honest taxpayers who want their refunds processed quickly and reformers who want tax cheats to be caught.