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Legal Review: D.C. Government Fights Tax Fraud

by Farral Haber — March 23, 2016 at 12:30 pm 0

PriceBenowitz

This column is written by Farral Haber, a Federal Criminal Attorney in D.C. and Virginia. Farral is part of the White Collar Defense Team at Price Benowitz LLP, a law firm based out of the District of Columbia. Please visit her profile to learn more about her practice areas and experience.

“In 2015, the D.C. tax office caught 25,000 fraudulent tax filings worth roughly 36 million dollars,” says a recent DCInno article. This year, tax fraud in D.C. is expected to become an even more serious issue, according to Stephen Cordi, head of the D.C. tax office.

One of the reasons tax return fraud is on the rise in D.C. has to do with last year’s OPM and IRS hacks. Hackers can use the social security numbers, addresses, and other personal information they stole from D.C. residents to commit tax fraud.

In order to fight the expected incoming wave of fraud, D.C. has signed deals with two tech companies: Colorado-based FastEnterprises and New York-based LexisNexis. The companies will help D.C’s Office of Tax and Revenue (OTR) process tax returns and compare the information on the returns to their “expansive databases of other tax records,” in order to find fraud patterns or suspicious elements.

While the OTR has used a similar approach in the past, Cordi said that they were only able to compare the tax return information with “homegrown database of D.C. information,” as opposed to the vast databases of LexisNexis and FastEnterprises.

If a tax return document goes through this process and comes back tagged as suspicious, the OTR plans to send a letter to the resident that appears to be responsible for filing the document. The letter would include instructions explaining how to take an “Identity Confirmation Quiz” over the phone. There has been some skepticism regarding this stage of the process because residents are concerned that they would not know whether the letter itself is a scam.

According to D.C. Attorney Farral Haber, “When it comes to tax fraud, it is important to know your rights or to contact someone who does. It is a serious matter and the consequences for committing tax fraud can vary from simple fines to years of imprisonment, depending on the crime.”

For now, the OTR will be using this system for individual tax filings, but the plan is to start examining corporate tax returns and D.C. sales taxes in a similar way in the near future.

Borderstan contributor and law firm sponsor Price Benowitz LLP

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