If there are 2 federal tax refund credits directed to different individuals via ACH that are made to a deposit account held in the name of someone else and the credits total less than $5,000, am I required to file a Suspicious Activity Report?

Filing on amounts less than $5,000 is voluntary. Of course, if the custromer received 2 already more may follow. As important as deciding whether or not to file a SAR is what did you do with the 2 already received and what will you do with the account that they were received in?

FIN 2013 - A001 Mandatory reporting kicks in when the amount involved exceeds $5,000 and you have a suspect.

So, if the amount exceeds $5,000 and we have a suspect, what would be the reason for filing on the SAR? It's the bank's policy as to whether they will allow a direct deposit for someone who isn't on the account. From what I've read, the IRS allows up to three direct deposits of refunds into one account.

Per the Advisory linked above, you file if you suspect income tax refund fraud, not because you received more than one payment.

Thanks!

For what it’s worth:

We had a similar case where a customer received a number of electronic credits that referred to IRS Tax Refund and included the for benefit name of a person other than our accountholder. An investigation was commenced and we eventually determined that our customer was a Tax Preparer and using IRS Form 8888 (Allocation of Refund), set-up to have their “earned” preparation fees deducted from the full client refund and sent directly to their own account.

Form 8888 is for individuals to allocate their refund into up to three of their own accounts, not to allocate a portion of their refund directly to their tax preparer. The IRS is pretty clear in it's statement that tax preparers should not have refunds directed to their own accounts, even in part:

http://www.irs.gov/uac/Refund-Returns

I was unaware of those specifics contained in your provided cite, so Big Thanks for sharing. In our case we closed the account because maintaining required too much effort in terms of monitoring/activity vetting.

I just learned today that I am a victim of tax return fraud! Someone filed a federal return for me on-line and I wonder what checking the IRS does to compare the income reported on the return to the W2 and other tax forms sent. The only saving grace for me as of now is that the ACH credit for "my" refund could not be posted to "my" account and instead I received a check from H&R Block which caused me to contact Block and start an investigation. Not a good day for me.

It creeps me out to know that this happens to "real" people. My understanding is that the IRS verification processes are not run for many weeks after tax returns are usually filed. That's why tax fraud works.

Lesson here might be - adjust your withholding so that you'll owe money instead of getting a refund. Then let someone "steal" your tax debt!

Consider that tax returns can start being submitted as early as January and that W-2 information returns don't have to be submitted by employers to the IRS until the end of February and sometimes early March depending on weekends. Add the time it takes for the IRS to load the W-2 data into their already challenged computer systems, and there's a window of time during which there isn't any info against which the IRS can compare figures reported in the tax returns that are filed electronically in the first two months of the year (and probably longer).

Taxpayers aren't going to sit still for a delay in return processing until the matching can be accomplished, so the IRS is caught in the information gap.

The returns filed by the scamming thieves don't necessarily have any basis in reality other than a name and SSN (those can be IRS-matched).

If the IRS doesn't have it already, it ought to develop the capability to compare key information from the new return with that in the prior year's return for consistency. If there are changes in those elements -- address, employer EINs, for example -- flag an e-filed return claiming a refund for further review before paying it.

We were a recipient of a lovely 5071C letter a week ago from the IRS. Someone filed a tax return using my wife's information and something didn't jive so they sent her a letter needing her to contact them to perform an ID verification before they would proceed with the tax filing. So, they are doing a better job at validating some of this.

She was unable to perform the validation on-line and had to call and speak to an actual agent. The agent that she reached was courteous, professional and very helpful in the explanation of the verification process. The only real drawback is that we now have to file our taxes in paper form this year and have to mail the tax return to a special fraud division.

I guess I will have to be especially careful and diligent with my business expenses this year

Randy: can you share with me the address of the special fraud division, since the fraud affidavit that I have indicates that the paper return is to be mailed to the location where the "normal" return is to be mailed? Thanks.

Also, everything that was said above about the IRS not verifying information on returns before issuing a refund is true in my case.

Randy -- did the letter or the agent indicate what type of information on the bogus return triggered the attention? I don't imagine so -- the IRS wouldn't want to tip its hand -- but curiosity demands that I ask.

My fraudulent return was e-filed using Block software and when I went into a local Block office to return the fraudulent check the office manager said that he was a victim also and his return was flagged since the refund was to be sent to an offshore account. This is a possible reason for flagging before issuing the refund. Reconciling income and other financial information on a return seems to be low on the IRS list.

devsfan - Well, I could, but maybe it all depends on the actual circumstances - I would not do it without specific instructions from a IRS agent. If you are concerned about it, I would call. If you were not issued a 5071C letter, maybe you do not have to mail to a specific location. Plus, there may be more than one around the country.

John, - no, they did not tip their hand.

I think John's point about taxpayers not wanting to "sit still" for the inherent delay the matching process would generate is the key.

With this much money going down the tubes, I really could not care less how long people have to wait for their refund. If that's a problem for them they should adjust their withholding so they don't have a refund! Intentionally loaning the government money is just wrong.