Investigator: Prisoners scam taxpayers out of millions

11:55 PM, Nov 7, 2012   |    comments
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CLEVELAND -- Inmates in Ohio prisons earn "chump change" doing odd jobs, including kitchen and maintenance work.

But a number of convicts are receiving millions of dollars in undeserved tax refunds by filling out fraudulent returns.

In one year, prisoners nationwide collected $130 million by filling out bogus tax returns. Since 2004, the number of inmates filing phony returns skyrocketed from 18,000 to 45, 000.

"That $130 million either means we have more debt or it means we don't fund education and health care as much as we'd like," said U.S. Senator Sherrod Brown.

The veteran lawmaker is pushing for reforms. "It's really theft from taxpayers, from the country as a whole when this scam is allowed to happen," said Brown.

Convicted killers and other felons in Ohio prisons cranked out nearly 1,500 fraudulent returns in one year. Amazingly, about half of the returns came from inmates doing time at London Correctional, located about 30 miles southwest of Columbus.

"I think it's unbelievably ridiculous. This is shocking," said Nanette Baker, a local taxpayer.

Ronald Wells was doing a life stretch for murder at Trumbull Correctional near Warren when he began filing fraudulent returns. Wells used the Social Security numbers of other inmates, claiming more than $236,000 in refunds on 36 phony returns.

The IRS mailed 11 refund checks totalling $56,000 to addresses that Wells listed outside of prison walls.

Some inmates are so brazen they register with the IRS as tax preparers without telling the agency they're in prison.  Three hundred and thirty convicts -- 43 on death row -- received tax preparer ID numbers, only to have them taken away once the IRS learned about it.

Senator Brown believes there needs to be better sharing of tax information between the IRS and the prison system to stop the fraud.

If pending legislation allowing disclosure of inmate tax information is passed, prisons could then discourage convicts from filing bogus returns and punish them if they do, using administrative sanctions.


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