WRAL Investigates

NC inmates cash in on fraudulent tax returns

Posted March 14, 2011

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— By law, prisoners are required to file tax returns, but a federal new audit shows thousands of fraudulent tax returns from inmates.

Across the country, nearly 45,000 false tax returns were filed by inmates for 2009, according to a report issued by the U.S. Treasury Inspector General. Criminals requested $295 million in refunds.

In North Carolina, inmates filed 376 fraudulent returns, asking for $1.4 million in refunds.

While the IRS catches some of the fraudulent returns, millions of dollars are still ending up in the hands of inmates.

The report shows prison inmates received $29 million in refunds through false returns.

North Carolina Department of Correction spokesman Keith Acree said the report isn’t surprising.

“It’s obviously concerning to us,” Acree said. “Workers, when they see mail headed out of the prison headed for the IRS, will direct that mail to an IRS fraud detection unit so it can be screened and let the IRS determine if it's a legitimate return.”

However, two years after Congress passed the Inmate Tax Fraud Prevention Act, prisons and the IRS still haven't agreed on how to share information about specific inmates committing the fraud.

Among state and federal prisons in North Carolina, Maury Correctional Institution near Hookerton reported the highest number of fraudulent returns by inmates, with 34 filed in 2009. Lanesboro, Franklin and Pasquotank correctional institutions each had more than two dozen cases of false returns.

While the IRS won't disclose the specific number of fraudulent refunds issued to individual inmates, reports show North Carolina prisoners received almost $200,000.

When filing, some inmates tried to take advantage of the First Time Homebuyer's Credit.

In some cases, the IRS had incomplete information about inmates from the states, like partial or incorrect Social Security numbers or wrong birth dates, including some from the 1800s.

In other cases, inmates had outside help to, in essence, commit identity fraud.

“Inmates who violate the law do break laws while in prison can be prosecuted in a court for those things. But, additionally, we can also have sanctions in our internal disciplinary system inside the prison,” Acree said.

The DOC doesn't investigate or prosecute. Instead, the IRS identifies and handles the cases, but the agency admits that it doesn’t focus on inmates who are already behind bars. They instead go after those outside of prison who help commit fraud.

NC Sales Tax NC inmates commit tax fraud

IRS officials say the agency takes prisoner refund fraud seriously and has programs to aggressively combat it.

Legitimate taxpayers see the irony, but they just want a solution.

“I'm appalled, and I think that's really ridiculous and the state should do something about it,” taxpayer Natasha Sanford said. “You have people who are working two and three jobs who don't get that type of money from the state of North Carolina. I'm shocked.”


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  • Inter Alios Mar 15, 2011

    "In North Carolina, inmates filed 376 fraudulent returns, asking for $1.4 million in refunds."

    With a prison population of apx. 43,000, only 0.00874 of the inmates in prison in NC filed fradulent tax returns. To put this story in perspective, would someone please tell us the percentage of fradulent tax returns filed by those not in prison in NC?

  • lindakcreech Mar 15, 2011

    This should say it all: Only in America!

  • tritonlm6 Mar 15, 2011

    Good for them. I know what kind of return I'd send in if I was doing 30 to life for murder.

  • Dark of the Moon Mar 15, 2011

    Gotta love the GUBMINT!!!

    And they want to run our healthcare.

    GOOD GRIEF!!!!!

    Charlton Dude

  • GetRight Mar 15, 2011

    Oh yeah! Let's put the government in charge of more of our lives since they do such a good job.

  • YNCSW51 Mar 15, 2011

    This is crazy, they should not be allowed to file income tax returns at all. If money is owe then the federal and state should get to keep it. I agree with many posts here. I work pay my taxes and now you got prisoners defrauding the government. Our elected officials need to do something about this immediately.

  • sammyg Mar 15, 2011

    Unbelieveable! This needs to be stopped immediately. Where has all the common sense gone??

  • earsonthenews Mar 15, 2011

    The inmates that work public jobs have paid income taxes through payroll deductions just as you and I. They also pay a percentage of their paycheck to the State for housing them and transportation to and from work. http://www.doc.state.nc.us/dop/Program/wkrel.htm

    Because they work they must pay for most of their own upkeep while incarcerated. I agree that fraudulent tax returns cost everyone money but if they work and pay taxes shouldn't they have the right to file returns. I don't think they should be able to file first time homeowner and dependent deductions.

  • pyranna Mar 15, 2011

    Do they face additional charges and resulting liens??? I really wish this item was more informative. Face value is that this is scary and the state aids and abets.

  • jet2rdu Mar 14, 2011

    The biggest and simplest red flag to the IRS and NC state government should have been locations where NO money is being sent back to them as taxes due, but only taxes over paid due refunds.

    It is hard to repeal the law of averages