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Tax Fraud Committed by Prisoners Has Cost Taxpayers $123 Million Since 2004

Earlier this month, the Treasury Inspector General for Tax Administration (TIGTA) released a report finding that prisoners in both federal and state penitentiaries are filing fraudulent refund claims without consequences because the Internal Revenue Service (IRS) has not disclosed information with the Federal Bureau of Prisons (BOP). In 2009, there were 1,464 fraudulent tax returns filed by inmates- nearly half of those were inmates housed in Ohio's London Correctional Institution, according to the IRS. 

In 2009, there were 1,464 fraudulent tax returns filed by inmates - nearly half of which originated from inmates housed in London Correctional Institution, according to the IRS. Brown released a full report of Ohio prisons housing inmates that filed fraudulent returns.

Brown, along with Sens. Charles E. Schumer (D-NY) and Amy Klobuchar (D-MN) sent a letter to BOP and IRS demanding that they immediately crack down on these fraudulent filings and begin sharing information as directed by Congress in 2008. The Inmate Tax Fraud Prevention Act of 2008 provides the IRS with the authority to share information on prisoners who have filed a false tax return with the head of the BOP and State departments of corrections. The law also requires TIGTA to provide Congress with a report on the IRS's progress in sharing prisoner tax information.

In his letter to both the IRS and the BOP, Brown noted that under The Inmate Tax Fraud Prevention Act of 2008, the IRS was given the authority to release tax information on incarcerated individuals to federal and state corrections officials. Despite this authority, the BOP's fear of litigation from not disclosing to prisoners impending enforcement actions has hampered enforcement. Even though federal law prohibits the Bureau of Prisons from sharing tax information with the prisoner, the agency refuses to cooperate with IRS.

Brown is calling on both the BOP and the IRS to use the authority granted to them by the Congress to immediately begin sharing information so that prison officials can route out fraud occurring in federal and state penitentiaries. Brown intends to call for oversight hearings over the poor handling of prison tax fraud if the agencies do not immediately begin sharing information and cracking down on the practice.

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