From Yahoo Finance:
- The IRS identified 335,341 tax returns claiming $1.9 billion in fraudulent refunds as of March 4, 2011, according to the findings of an audit conducted by the Treasury Inspector General for Tax Administration. That's a whopping 181% increase from the same period last year.
- While the IRS has become more effective in its screening process, a weak economy has also driven more people to cut corners, said Tim Gagnon, assistant academic specialist of Accounting at Northeastern University.
- "When the economy gets really bad, people get more touchy about how much they're paying in taxes and look at where they think they can push the envelope a little more," said Gagnon. "100 extra dollars really makes a difference to people now."
- Many taxpayers tried to boost their refunds or reduce their tax liability by claiming deductions and credits they didn't qualify for, TIGTA found.
- For example, the Earned Income Tax Credit, aimed at helping lower-income taxpayers, has been a large source of fraud, with people falsely lowering their income to qualify or claiming children they don't have. The IRS estimates that 23% to 28% of EITC credits are wrongfully paid to Americans every year, totaling $11 to $13 billion.
