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Convicts become certified tax preparers

Hundreds of incarcerated felons have received an identification number from the IRS in order to file returns electronically.

In “The Shawshank Redemption,” one of film’s most memorable accountants found himself on the wrong side of a prison wall. “On the outside, I was an honest man, straight as an arrow,” said Andy Dufresne, played by Tim Robbins in the mid-1990s. “I had to come to prison to be a crook.” According to an audit last week from the US Treasury, some criminals may have come to prison to become accountants, or at least on paper.

The audit, conducted by the Treasury Inspector General for Tax Administration, found that 331 current inmates have received an IRS identification number that allows them to file returns electronically as a registered tax preparer, reports USA Today. Between September 2010 and July 2011, 43 of these inmates were serving life sentences, while 962 applicants were incarcerated within the last ten years. Altogether, more than 75% didn’t disclose their felony convictions on the application.  

"Our report shows that the problem of misuse of the tax system by prison inmates continues," J. Russell George, head of the inspector general's office, told USA Today. "Based on our report, the IRS is working on solutions for suspending preparer identification numbers obtained by prisoners and preventing future applicants who are prisoners from receiving a preparer ID number. They must persevere in these efforts … especially given the prison inmate population's determination to misuse the system."

This January, an IRS report to Congress stated that $39.1 million in false returns was disbursed to inmates nationwide in 2009, USA Today reports. Earlier this year, the IRS proposed to institute background checks for certain tax preparers using FBI fingerprint databases, but tax preparers said it would be too expensive. An agency spokesperson told Reuters that the IRS is still reviewing the proposal, but hasn’t announced a timeframe for making a decision.


By Editor Will Cade