This is the seventh in a series of blog here at stoptheftclass.com addressing the frightening issue of tax fraud. Believe it or not, tax fraud costs this country hundreds of millions of dollars. So while the IRS is going after some people for minor deductions, thousands of people are filing false tax returns and getting unearned refunds.

In our previous blog we looked at one simple way to curb this problem by not issuing any refunds until after the April 15th filing deadline. That would enable the IRS to discover duplicate returns on the same social security number. As reported in www.bostonglobe.com.

Another way to cut the identity theft would be for Congress to approve a recommendation from the office of the National Taxpayer Advocate to create a “real time” system in which tax returns would be matched up front with third-party financial information such as statements on wages and interest and dividends.

Currently, the IRS often receives the electronic version of that information weeks or months after it has issued a refund.

When the IRS gets a return that claims a refund, the IRS does not have the ability to check that the taxpayer is entitled to the refund, that it is a real person. They don’t have records to say whether the person claiming the refund is entitled to it. They just send the check. That sounds like a recipe for disaster, right?

Koskinen, the current commissioner, said that he would like to see returns checked up front with financial information, while acknowledging that such a change might take several years to fully implement. It would also likely require Congress to increase IRS funding at a time when it has been cutting the agency’s budget.

Many of the fraudulent tax returns are filed by using the Social Security numbers of people who are not required to file returns and thus don’t realize their identity was used to obtain illicit refunds. For example, potentially fraudulent returns were filed in 2011 using the Social Security numbers of 1,451 children under 14 years old; 19,102 dead people; 37,249 prisoners; and 753,000 people whose income level did not require a tax return.

The ability of criminals to file returns using the names of dead people has been a known problem for years. It has long been easy to get access to what is known as the “Death Master File,” which includes Social Security numbers of recently deceased people.

A criminal can use the Social Security number of a dead child, for example, to claim that person as a dependent in the year of death. It was not until December that Congress passed legislation to restrict the public’s ability to get such information, and it still remains available while regulations are written to implement the new rule.

Koskinen, the IRS commissioner, seemed stunned when he learned at a congressional hearing on Feb. 5 that the Death Master File was still publicly available, saying it represents a “target of opportunity” for criminals to steal identities.

The theft of taxpayer identities has become a thriving business. In one recent case, a Florida nursing home employee and an accomplice were found to have stolen the Social Security numbers and other information of 617 people, assembled the data in a spreadsheet, and then sought to sell it for $28,500. (The “buyer” was an undercover officer.) A California man was found to have stolen personal information from a state agency and filed false returns. An employee of an Alabama state agency was found to have stolen identity information from a database and sold it an accomplice who filed more than 1,000 false returns.

Some of the identity theft is committed by tax preparers from their offices. Preparers have filed returns using a client’s information and then had all or part of the refunds sent to themselves. One-third of the potentially fraudulent returns were filed by paid preparers, many of whom are not regulated, according to a Treasury report.

A government investigation, for example, found that one unnamed tax preparer submitted 5,506 potentially fraudulent returns, which resulted in refunds totaling $26.8 million.

During a Senate hearing last year, an incredulous Senator Claire McCaskill, a Missouri Democrat, asked why the IRS allowed 2,000 refunds to go a single address, an obvious sign of potential fraud. George, the Treasury inspector general for tax policy, responded that the IRS “needs a statutory fix in order to limit . . . the number of returns that are issued to the same bank account, debit account, what have you.”

“No, you’ve got to be kidding,” McCaskill responded.

A number of identity theft cases have been committed by tax preparers who have been accused in broader cases of fraud. For example, Rosa Ivette Colon,who ran a company called X-Press Taxes in Somerville, Mass., prepared hundreds of false returns, including two instances in which “she filed tax returns in individuals’ names without their knowledge,” according to the Justice Department. She was sentenced last year to 61 months in prison and was ordered to pay $400,000 in restitution. Her public defender declined comment.

The case of Rashia Wilson has helped publicize the issue of taxpayer identity theft, in part because of the colorful way the Tampa woman was said by authorities to have boasted about her activities.

She posted on her Facebook page that she was the “queen of IRS tax fraud,” along with a picture that showed her hoisting bound wads of bills, according to court records. She dared the government to catch her, writing on Facebook, “I’m a millionaire for the record, so if U think indicting me will B easy it won’t, I promise you!”, according to prosecutors.

The money piled up as Wilson submitted one false return after another, the indictmentaid. Using the identity of a taxpayer with the initials S.M.W., Wilson on April 15, 2009, obtained a $7,524 refund, the indictment said. Many similar refunds were obtained in the following three years.

Using those refunds, Wilson stayed at hotels, withdrew money from ATMs, and bought furniture, according to prosecutors. Then in May 2012, Wilson bought a 2013 Audi A8L, handing over a cashier’s check for $92,682.67, the proceeds of fraudulent federal tax returns and refunds, according to the indictment.

Wilson’s attorney, Mark O’Brien, said they have served as a wake-up call to the government. “This was a lot worse than most people could possibly comprehend,” O’Brien said in an interview. “The amount of money that has been stolen from the IRS is mind-boggling. I don’t even think they realize how much has been stolen, but they are certainly starting to understand, as you can see from recent investigations and prosecutions.”