Skip to content
← All fraud types

Public Programs

Tax Refund Fraud

Filing false or stolen-identity tax returns to claim refunds, inflating credits, or diverting refunds through corrupt or 'ghost' preparers who vanish after filing.

01 — How it works

  1. 01

    Gather

    Collect stolen SSNs or willing filers.

  2. 02

    File

    Submit false returns that generate refunds.

  3. 03

    Divert

    Route refunds to controlled accounts or prepaid cards.

  4. 04

    Repeat

    Rework names and numbers each filing season.

02 — Lifecycle

From first contact to detection.

  1. Filed

    A false return is submitted to the IRS.

  2. Screened

    Automated systems may flag the return.

  3. Refunded

    The refund is issued to a controlled account.

  4. Clawed back

    IRS-CI traces and pursues recovery.

03 — Common variants

  • Identity-refund fraud
  • Credit inflation
  • Ghost preparers
  • Refund diversion

04 — Statutes & penalties

26 U.S.C. § 7206 (False Return), 18 U.S.C. § 1343 (Wire Fraud), § 286 (Conspiracy)

Up to 3–20 years depending on the charge, plus full repayment, penalties, and interest; aggravated identity theft adds mandatory time.

05 — How people are drawn in

Commonly pitched as 'free money' or a bigger refund by a friend or neighborhood preparer; participants may not realize they are filing false returns.

06 — Examples

  • Returns filed with stolen SSNs and fabricated wages to generate a refund.
  • Credit inflation through faked dependents, businesses, or energy credits.
  • Corrupt preparers who file for clients and divert the refund.