Defrauding the IRS Seems Lucrative and Low-Risk

Apparently, it’s pretty simple and low-risk to file fraudulent tax returns claiming that you qualify for thousands of dollars in refunds. The IRS will cut you a check, then maaaaaybe somewhere down the road they’ll notice something fishy, then maaaaaaybe they’ll catch you, then maaaaaaaaybe they’ll try to get the money back.

No fooling.

Here’s a story about one of the ones they caught up with. He took in half a million dollars over three years this way — and all he had to do was just to pull the numbers out of his butt. Nothing fancy. It was only accidentally, “after federal agents learned that Fisher had cheated a local car dealer out of $1.2 million and used that money to buy gold bars and silver coins,” that the tax fraud was uncovered incidentally to that investigation.

A recent TIGTA audit found out that this sort of fraud is a billion-dollar problem for the IRS.

“This problem is becoming unmanageable,” the audit said.

The agency issued an estimated $1 billion in potentially fraudulent refunds, four times what it originally estimated, and then didn’t bother to further investigate half a million of the returns with discrepancies. Their Criminal Investigation division tracked down about $189 million of that billion, but left $894 million on the table.

From time to time I’ve read what I thought of as sort of interesting thought experiments about how massively-multiplayer video game universes have started to develop impressively large economies, with measurable exchange rates with the real world, and about whether real-world governments would eventually try to dip their taxing fingers into this revenue stream.

Turns out it was less of a sci-fi thought experiment than I thought. The governments of Australia and China are already implementing virtual currency taxation schemes.

It’s a strange new world. Did you ever think when you were playing “Monopoly” as a kid that one day it would come to this?

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