Busted: Requests For $3.3 Trillion In Fraudulent Tax Refunds

IRS taxes fortune cookie tax cheat offshore haven

Most people cheat a little on their taxes, but this is striking: a scattered group of Americans allegedly submitted fraudulent requests for $3.3 trillion in IRS refunds via promoters of a tax scheme.

The Department of Justice announced today that it filed seven lawsuits nationwide — in Los Angeles; Panama City, Fla.; Salt Lake City; Nashville, Tenn.; and Pocatello, Idaho – to block the alleged “redemption” or “OID redemption” scam.

The suits allege that the defendants promote a tax fraud scheme designed to siphon hundreds of millions of dollars from Treasury through the phony refund claims. John DiCicco of DOJ’s Tax Division said the “scope of the misconduct alleged in these lawsuits is staggering.”

Here’s how it worked.

DOJ: Under the tax fraud scheme, known as the “redemption” or “OID redemption” scheme, participants file a series of false IRS forms, including tax returns, amended returns, and Forms 1099 (including Form 1099-OID) or Forms W-2, to request fraudulent tax refunds based on phony claims of large income tax withholding. According to papers filed in these cases and earlier cases against other alleged scheme promoters, redemption scheme promoters are tax defiers who falsely tell customers that the federal government maintains “secret” accounts of money for its citizens. Promoters claim to be able to help customers access the secret funds by filing the false IRS forms.

Papers filed in the cases say the defendants prepared tax returns requesting a total of $562.4 million in bogus refunds. For example, Dick Jenkins, a defendant from Utah, allegedly holds himself out as a CPA and requested a $210 million fraudulent refund for one customer.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.