More IRS Employees Abuse Access to Taxpayer Data to File Bogus Returns

Do you really think this is the worst of it?


Matthew G Bisanz

From the files of the federal agency that really should have a summer internship program for identity thieves (Oh wait! It basically does.) comes the tale of yet another employee who discovered the lucrative possibilities in all of that sensitive information you and I are required by law to share with the Internal Revenue Service. Seasonal tax examiner Elaina Norris allegedly scoured through IRS databases for the identifying information of random individuals who could be claimed as dependents on tax returns, according to the Treasury Inspector General for Tax Administration.

Fishing for exploitable identities apparently came easily for Norris, who "had access to the names, Social Security Numbers (SSNs), dates of birth, and other personally identifiable information of taxpayers and their claimed dependents." It was also her job to verify the accuracy of returns and sign off on the righteousness of claims made therein.

Norris prepared and caused to be filed the 2008 Federal income tax return of her relative. The return falsely claimed two dependents and claimed, for the purpose of the Earned Income Tax Credit (EITC), that the dependents lived with her relative for eight months in 2008. In fact, neither of the individuals listed were relatives; they did not live with the taxpayer (Norris's relative) during the tax year; and they were not the taxpayer's dependents.

Increasing the number of dependents a taxpayer claims on a Federal income tax return may decrease the taxpayer's tax liability or increase the taxpayer's refund.. Norris obtained the legitimate names and SSNs of the claimed individuals through her employment in the ERS unit for the purpose of falsely listing them as dependents on her relative's tax return. Norris knew that the individuals were not her relative's dependents and that they did not live with her relative for eight months of the year. Norris's preparation and submission of the fraudulent tax return caused her relative to claim unauthorized tax deductions and credits.

Additionally, Norris prepared and filed her own 2008 Federal income tax return, falsely claiming a dependent described as her "nephew" and claiming for the purpose of the EITC that the dependent lived with her for eight months in 2008. Norris declared the accuracy of her return under the penalties of perjury, knowing that these claims were not true, and that the individual was not her dependent and did not reside with her. As a result, Norris claimed and received tax deductions and credits to which she was not entitled. The following year, Norris again falsely claimed the same dependent on her 2009 tax return and claimed that the dependent lived with her for seven months of the year, thereby knowingly claiming and receiving tax deductions and credits to which she was not authorized.

I'm guessing that whoever was really responsible for the dependents in question might have received a bit of a surprise when submitting their own returns. After all, the presence of those kiddos in somebody else's household far, far away had already been vouched for by a no-shit tax examiner with responsibility for "verifying the accuracy of claimed dependents on taxpayers' income tax returns."

Now, to be honest, Norris has only been arrested and indicted—not convicted. She has good company in former IRS contact representative Modestine Gillette who also allegedly found lucrative uses for her "access to IRS computerized files containing confidential tax return information for taxpayers, including names, Social Security Numbers (SSNs), and income information."

Between February 2010 and February 2012, Gillette knowingly prepared and filed, or caused to be filed, nine Federal income tax returns which contained false, fictitious, or fraudulent information, and diverted Government funds from those returns for her own benefit. Most of the individuals listed on the fraudulent tax returns had provided Gillette with their true income and expense information and had authorized Gillette to prepare and submit their returns for them. Nevertheless, the tax returns Gillette prepared and submitted to the IRS reported false information, including income not earned by the taxpayers, business expenses not incurred, false dependent claims, and inflated refund requests. The total amount claimed was $34,466. One taxpayer did not authorize Gillette to prepare and submit a return on her behalf; however, Gillette used her identification to submit a fraudulent tax return, request an inflated refund, and direct the inflated refund into a bank account in the name of her (Gillette's) spouse.

Given the vast amounts of hacker bait to which IRS employees have access, I remain impressed and relieved by the small size of the scams with which tax collectors entertain themselves.

Or maybe we're only seeing the small-timers too amateurish to evade detection. The Inspector General has warned that the IRS has a bad habit of rehiring people it fired for transgressions such as digging through databases without authorization. And the Government Accountability Office cautions that, because of sloppy internal practices, "taxpayers could be exposed to loss of privacy and to financial loss and damages resulting from identity theft or other financial crimes."

I wouldn't bet that the repercussions end at a few bogus dependents and fraudulent returns.

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  1. The solution is the FairTax.

    1. By fair tax you mean No Tax, right?

      1. At this point, any system that destroys the IRS would be a step in the right direction. Seriously, some of our ancestors killed people over less than what’s going on there now. But we just sit here, twiddling our thumbs. Don’t think violence is the answer, but some public screaming and strategic voting might be in order.

        1. You don’t want to know what my ancestors did, pal.

          1. I’m not your pal, bud.

            1. Aww. That hurts.

              1. Florida Man|5.20.15 @ 7:35PM|#

                Aww. That hurts.
                I’m not your bud, guy!


              2. I thought afterwards that I should have said

                I’m not your pal, man.

                But NO EDIT BUTTON!

          2. The King ordered it!

        2. So you want to put tax accountants out of work is what you’re saying.

          1. I’ll say it if he won’t.

          2. And tax attorneys. Really, these are educated, intelligent people. I’m confident that they can find alternative careers.

            1. The fact that tax attorneys even exist is an indictment of the system.

              1. I know tax attorneys who would agree.

          3. Yes yes and most definitely yes

        3. I’m not usually for mob justice…but the irs needs it. *pushes Pro forward . I’ll b right behind you.

    2. The solution is the FairTax.

      Gubmint checks for all!

      Federal monitoring and enforcement on every economic transaction.

      1. I’ll guess you’ve never worked in retail. Collection of sales taxes does not require any monitoring of individual transactions. The government “monitoring” of total sales is already in place in most states to enforce state sales taxes.

        1. I dunno, I suspect a federal sales tax would up the ante. POS systems would likely have to have built in reporting to some massive IRS database.

          1. State sales taxes work just fine without that, so I don’t see why that would be likely, and the FairTax plan eliminates the IRS, so they wouldn’t be there to report to.

          2. State sales taxes work just fine without that, so I don’t see why that would be likely, and the FairTax plan eliminates the IRS, so they wouldn’t be there to report to.

            1. I’m not opposed to the fair tax concept, provided, of course, the 16th goes away and the income tax is expressly made illegal in the Constitution.

              1. And it damn well better not be revenue-positive. I’ll still oppose it if its revenue-neutral.

            2. Some states don’t have a sales tax, others it is around 4-5%. FairTax is like 30%, or 23% for the innumerate. The stakes are much higher.

              1. And it applies to houses and cars, IIRC. People won’t put up with such blatant thievery. They put up with the income tax because withholding hides it.

          3. I think the best solution is simply to require the *state* to fork over the sales tax check in one big lump sum.

            Rather than each individual business keeping tabs on state and federal sales taxes.

            You pay one rate to the state government and a percentage of that is sent off to the federal.

            Takes away direct funding of the federal government and gives states a leash to keep it under control.

            Of course that’s why nothing that will reduce the federal government’s independence, let alone its ability to control the states, will ever happen.

            Even right now, with the income tax, its insane that 90% of my tax bill is going to the federal government just to have them turn around and hand it right back to the state with strings attached.

        2. Depends on your business.

          It doesn’t require knowing who’s *buying*, but it does require monitoring down to the individual item in an order to determine what is and is not subject to tax and how much (some things are exempt, some things get a discount, and it all varies depending on local laws).

          1. Under the FairTax, nothing is exempt.

            1. Dead weight loss. SLT doesnt have that problem.

              It also doesnt have the morality problem of the fair tax.

              1. All taxes have dead weight loss. Your land tax is no different. And your tax requires assessment. And it has just as much of a morality problem as a consumption tax.

                1. A land tax can be anonymous; all the gubmint cares is that it is paid. There is no intrusive financial monitoring.

                  If the land tax is based on value, not area, then appraisals enter the picture, but that still can be anonymously challenged by hired attorneys, and it still doesn’t have the financial intrusiveness of any consumption or income tax.

                  My personal pet scheme, which I freely admit is a fantasy, is to have self-declared assessments, with the proviso that no lawsuit or criminal charges can be filed for more than the self-assessed value. No doubt everybody would engage in a race to the bottom; but there will be some limit, and as long as everybody has similarly low self-assessments, governments can still set a single tax rate which raises the same amount of revenue.

                2. Not true. Land tax has no dead weight loss, in theory, because you are extracting rents.

                  Which is why it also has no morality problem, as I see no legitimate natural law claims to land. So extracting the rents in return for a deed is less troublesome than any other tax.

                  It does require assessment, but as its only the land, that should be an area assessment. Land in this area is worth x per acre times lot size.

            2. FairTaxers quit pretending the secondary market would be exempt?

              1. And how many retailers sell a mix of original retail and second sale goods? Pretty feeble strawman. Now if you wanted a better argument you could go after the exemption for education…

    3. You misspelled single land tax.

  2. Boy, we just keep piling on the reasons why an income tax is immoral.

    You want to create a massive spying regime which will be largely shrugged off, accepted and sometimes even championed by the public? Introduce an income tax.

    1. And now, with the income tax joined at the hip to Obamacare, it will be much harder to get rid of it.

      1. Not if you get rid of both simultaneously.

        1. Fine. I’ll need a paperclip, some paraffin wax and a running start.

  3. “Or maybe we’re only seeing the small-timers too amateurish to evade detection.”

    Probably this. The most successful pirate wasn’t Black Beard or Kidd, it was some guy you never heard of who retired to some island in the Caribbean with chests full of gold and sport fucked Indian women in between rum chugging contests.

    1. Who hasn’t heard of Captain Jack Sparrow?

      1. Who?

        1. Doctor to you.

      2. Is Marc Rich fictional, too?

    2. Funny. I looked that up last night because I’ve been playing assassin’s creed 4. I still can’t tell you his name.

      1. Her name? Ching Shih.

    3. Redbeard!!!

        1. That should’ve been a great movie. Why wasn’t it? It has some great moments.

          1. Because it wasn’t? If you think about it, a lot of the “this is by one or two Monty Python guys but not the whole crew” stuff fell pretty damn flat. Except The Rutles.

            1. I agree, but Yellowbeard was loaded with talent, and there were some scenes that were very funny. But it was a mess.

              1. Yes, I am aware, I watched it a bunch of times as a kid on HBO. Even at that age I could see how weak it was.

            2. And Fish Called Wanda.

              Also, does Fawlty Towers count? Connie Booth was often in Python episodes, after all.

              1. Yes, and both (the movie and the show) were totally brilliant.

    4. Do you have an actual guy in mind? Two that might fit the description: – was one of the captains to take what is probably biggest haul off a single ship, got a pardon and possibly retired to Panama. – also looted in Indian Ocean, bought a pardon, married a lady and died as a wealthy merchant

      1. “Do you have an actual guy in mind?”

        *Looks around nervously*

        No. Nobody in particular.

  4. Do you really think this is the worst of it?

    Not. Even. Close.

    Or maybe we’re only seeing the small-timers too amateurish to evade detection.

    DING DING DING…there is too much opportunity there for fraud and theft and too little security and oversight. There’s no way on Earth smarter thieves haven’t figured that out yet.

    With the government, we have seen again and again that it’s always worse than you think. WAY worse. Super worse. Mega worse. Nicole worse.

    1. I mean, think about it. How the crap we’ve heard–about the NSA, the IRS, the SoS, etc., all of it–has to be just the tip of the iceberg. They operate so much in secret, and so many of the people doing wrong are committing crimes and have strong incentives to keep quiet, so of course we see very little direct evidence of any scandal.

      1. Oh, that’s the whole point, ProL. Every single time we are given greater than usual insight/transparency into a government agency (whether it’s through Snowden leaks or VA whistleblowers or whatever), what we see is horrific. So bad that it’s mind-blowing. So bad that our immediate questions are “is anyone going to jail over this” (with the answer being “no”, of course) and “how could they hide this”.

        But remember that any transparency we’ve gained is minuscule. So if it’s this bad with a tiny increase in transparency, what’s it really like?

        1. The whole problem with human liberty is that humans as a whole don’t fight for it hard or frequently enough.

          1. I blame chimps. When humans were evolving they looked at chimp strongmen, raping and ruling weaker chimps, and thought, “that’s the life for me.”.

            1. It’s amazing the accomplishments we have, yet we’re still violent, hump-crazy monkeys.

              1. Be more positive: it’s amazing what humans have accomplished while being violent, hump-crazy monkeys.

                1. Right. I mean, we’re done all of this despite our failings, but I’m still not sure where we’re going to end up, unless we mitigate our failings with technology.

                  1. You’ve seen the internet right?

                    We’re not going to mitigate our failings with technology, we’re going to *amplify* them.

                  2. Space apes?! Flinging poo at the universe. That needs to be a

                    1. Movie

                    2. Space apes?! Flinging poo at the universe.

                      I unironically stand 100% behind this future for human race. If we get into space you bet we’ll fling the shit at its face, be it an unspeakably large empty void, or Lovecraftian cradle of uncaring horrors.

              2. violent, hump-crazy, over-clocked monkeys.

                We’ve voided most of God’s warranties.

    2. I’d mostly agree, but I know someone who works for the devil (hell, he won’t even claim the IRS in public, claims he works for the Treasury Dept.), and if the rest of the outfit is half as incompetent as the ones he works with, there aren’t any smarter thieves in the building.

      1. It’s both malevolence and incompetence. There used to be some decent and competent people sprinkled into the mix (usually in the career ranks, not the appointees so much), but I bet they’re fading away, as the open corruption and illegal activities increase.

      2. Incompetence probably wastes more money than outright theft, to be honest. It also opens up data to identity thieves outside the organization.

        1. They work so well together. It’s like Reese’s. Two great vices that vice great together.

          1. Hey! You got your incompetence on my malice!

            1. You got your malice on my incompetence!

              1. I’m officer Reese, wait a minute.

      3. The FBI isn’t any better with their classified materials handling?

    3. And doesn’t it sound like Norris’ job consists of checking one database against another?

      I bet you could replace half that department with ten lines of code.

      1. And what would happen to those good jobs that pay a living wage?

        1. Gigalos? They’ve already been fucking people.

      2. Something wrong with me. I thought that said ten lines of coke.

        1. Did someone say coke?

          (glances around eagerly)

          1. I just had a sudden insight into how you got into your career.

            1. What was that about coke, ProL? You said something with a “c” so I’m just going to assume it was coke.

              (starts twitching like Zoidberg when someone mentions food)

              1. Lines of coke, WHORETRAN, C (for coke), sexadecimal. . .I’m suspecting your career choice involved some sort of hearing deficit.

                1. I think he said coco puff.


                    I believe his is in fact, love with the coco.

  5. “Now, to be honest, Norris has only been arrested and indicted?not convicted.”

    Considering that Lois Lerner hasn’t been arrested or indicted, I’d say two out of three ain’t bad.

    1. She won’t be. She was protecting the IRS.

      From yesterday’s PM links: Conservative Group Uncovers New Roots of the IRS Scandal

      Short version: IRS Tea Party Scandal began 25 February 2010 ? months before Lois Lerner came on the scene on 13 May 2010 ? and the whole scandal was the fault of the Internal Revenue Manual and its rules designed to protect the IRS before the media and Congress. Applications “that are newsworthy, or that have the potential to become newsworthy” must be sent to Washington for review and Tea Party applications were ones “that are newsworthy, or that have the potential to become newsworthy” so they got flagged and sent to Washington for review and those “likely to attract media or Congressional attention” should have a “sensitive case report” opened. The low level employees all did their job properly according to the Internal Revenue Manual ? they sent “newsworthy” or “potentially newsworthy” cases to Washington and the Washington office opened “sensitive case reports” for cases like to interest the media or Congress.

    1. Poor guy, he’s only doing what his captors have been doing on a much larger scale.

    1. WTF?

      1. It’s just satire about the SJW worldview.

        1. As if that were even necessary

        2. Also a nice riff on Hilary Clinton’s “Women are often the real victims of war, because they lose their fathers, husbands and sons” statement, and the mindset that would come up with it.

          1. That statement is so indicative of her viewpoint on war and conflict. The fighters are expendable resources to be used for the ends of the state. Their fate is unimportant compared to those who remain at home.

    2. I am in Fort Privilege shall be my new battle cry!

  6. The systems are built for abuse. Designed to foster crass arrogance and infinite brokenness because human system math levels distance users from cloud power.

    Humans exist in an existential state that modern times haven’t configured yet. Minds are still trapped in centuries of mountains and plains. The clouds [up] is the great deity world and the plains [down] are the humans who are pulverized but needed for food and the various silks and precious metals.

    The elite is greater cash ownage but are homeless less smart? Facebook, the billion dollar idea with an owner who builds homes with hundreds of millions surrounded by no Facebook users I view as the most egregious assault on privacy destruction ever constructed where millions populate and I detest….as the homeless bridge dweller?

    Time proves minds. Decades love drifters and calculus. In 2050 will the internet by like a dumb Frigidaire on a lonely Sears shelf only some poor fuck wants to buy?

  7. Given the vast amounts of hacker bait to which IRS employees have access, I remain impressed and relieved by the small size of the scams with which tax collectors entertain themselves.

    Eh, the smart ones just sell the info. They don’t file returns for themselves. Sure, they make less money, but they take less risk, since it’s harder to trace the data back, especially if it gets sold a few times over.

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