FORT LAUDERDALE, Fla. — The returns often were handwritten. The income — from lottery winnings and bonds — was fake. But the IRS shelled out $3.4 million to a Florida father and daughter before getting wise to the fraud.
Big-sum payouts from the IRS to individuals like the Edmonsons are rare when compared with the many other claims filed by illicit tax preparers or identity thieves. But such fraud still happens more often than you’d think, according to experts and government documents.
Danielle Takeila Edmonson, 35, of Boynton Beach, and Kenneth Roger Edmonson, 51, of Oakland Park, started filing a series of bogus tax returns in 2015. Court records show that, over the course of four years, the duo claimed the IRS owed them over $175 million in withheld income.
The IRS, which employs both automated and manual screening practices to ferret out fraud in tax returns, ended up paying out — and more than once. It sent Danielle Edmonson a check for $239,700 in 2015. In 2016, the government agency sent her a check for $2.5 million. In 2018, it paid her father almost three-quarters of $1 million.
The IRS estimates that it paid out $1.7 billion dollars in invalid refunds in 2016, according to a 2018 report published by the U.S. Government accountability office. That same report notes that the tax agency estimates that it caught about 84% of fraudulent filings in 2016.
The father-daughter pair, who claim to be “Moorish sovereign citizens” immune to the authority of United States government, got caught. And they were convicted of mail fraud and making false statements by a federal jury in West Palm Beach on Dec. 20.
They now face a maximum sentence of 20 years in prison each for mail fraud charge, and five years in prison for each charge of lying on government filings.
But the crude nature of the pair’s scheme, documented in the handwritten tax returns and doctored Grenadian bonds submitted as evidence at trial, points to an inherent tension within the IRS between quickly paying out taxpayers’ refunds and making sure that the refunds aren’t based off fraudulent information.
“What the IRS does is try to match W-2 and 1099 forms and other third-party information returns to taxpayer returns,” explains Leandra Lederman, a law professor and tax expert at Indiana University’s Maurer School of Law.
Basically, the agency uses information provided to it by employers and other parties to try keep taxpayers honest.
But fraudsters are intent on gaming the system. An analysis of descriptions of prosecuted cases of tax fraud published yearly by the IRS’s Criminal Investigation Division reveals that tax fraud schemes often are mixed with identity theft, and are regularly carried out by dishonest tax preparers.
Spokespeople for the IRS declined to comment for this article, instead pointing the public to sections of the agency’s website where the agency explains how it tries to curb fraud.
Though much rarer, there are examples of people who, like the Edmonsons, filed returns in their own name and claimed they were owed refunds well in excess of any income they actually earned.
And in many of these cases, the IRS paid out. Consider:
In South Florida federal court, James LittleJohn, a South Carolina resident, pleaded guilty to charges similar to the Edmonsons’ in 2018, but not before the IRS had paid him almost $200,000 in fraudulently claimed refunds.
Mitchell Orewiler, a Pennsylvania man, managed to get $288,000 from the government with fraudulent returns before pleading guilty to making false claims to the IRS in Pennsylvania federal court in 2015.
A 2018 report published by the Treasury Inspector General for Tax Administration — a government agency that functions, in part, as an IRS watchdog — helps explain why the agency might at times be erroneously disbursing funds.
Focusing on tax returns selected for fraud screening, which had still had refunds paid out, the report found over $7.3 million in refunds that were incorrectly released because of programming errors.
A 2015 report published by the same agency, and advocating for improvements to “ensure that refunds claimed on potentially fraudulent tax returns are not erroneously released,” details another processing error that led to the IRS paying out an estimated $27 million in possibly fraudulent returns in fiscal year 2013, and seems to point to the release of possibly fraudulent refunds as an ongoing issue at the agency.
Other reports by the watchdog have identified loopholes in systems meant to catch fraud within amended filings.
“This is one reason why it’s important for Congress to fund the IRS,” Lederman points out, noting that over the past decade the agencies’ budget and staff have been slashed. A 2018 Propublica investigation documented how cuts at the agency have led to billions of lost dollars in tax revenue for the American government.
However “the IRS has gotten better over time,” Ledermen argues. Indeed, in written testimony before the Senate Finance Committee on April 10, Commissioner Charles P. Rettig of the IRS noted that between 2015 and 2018, “the number of suspicious refunds recovered has declined 66%.”
?2020 Sun Sentinel (Fort Lauderdale, Fla.)
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