The Subcommittee on Oversight of the House Ways and Means Committee holds a hearing today to examine tax fraud by prison inmates:

The hearing will focus on the current laws, policies and procedures to detect and deter tax fraud committed by prison inmates, and will explore further steps that can be taken by the IRS or Congress to eliminate this fraud.

The hearing will take place in the main Committee hearing room, 1100 Longworth House Office Building, beginning at 2:00 pm.

From the hearing notice:

While the vast majority of Americans pay their taxes with honesty and integrity, a small minority is responsible for large amounts of refund fraud. The IRS estimates there is a total of approximately $375 million lost to refund fraud each year, and remarkably, prison inmates are contributing to the problem from behind bars. The IRS estimates that 7.5 to 15 percent of all refund tax fraud is being committed by prison inmates. Furthermore, it appears that this problem is growing rapidly. Prisoners nationwide have developed elaborate schemes to receive refunds by fraudulently reporting earnings or claiming false eligibility for tax credits. Each year, prisoners are devising new methods to defraud the tax system, at the expense of American taxpayers.

The IRS has some procedures meant to detect and stop tax fraud by prison inmates, including maintaining a database of individuals who have been in prison within the last two and-a-half years. According to IRS data, during 2004, individuals listed in the IRS prisoner database filed 455,097 returns, seeking $758 million in refunds. The IRS successfully identified 18,159 (4 percent) of these returns as fraudulent, but only stopped 14,033 (77 percent) of the refunds, worth $53 million, from being issued. The hearing will examine IRS efforts to combat inmate tax fraud and consider improvements that could be made. In addition, the Subcommittee will hear about the efforts of State correctional systems to combat this fraud.

In announcing the hearing, Chairman Ramstad stated, “Tax fraud in any form is unacceptable. It is especially troubling when prison inmates are able to game the system from behind bars. We must find ways to stop this outrageous behavior.”