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Inmates charged in tax fraud scheme

By Kay Bell · Bankrate.com
Thursday, August 21, 2014
Posted: 2 pm ET

Federal law enforcement officers just conducted what are probably two of the easiest arrests they will ever make. The two men who stand accused of receiving more than $400,000 from fraudulently filed tax returns were already serving time in a Minnesota state prison.

© ANURAK PONGPATIMET/Shutterstock.com

Tanka James Tetzlaff, 39, and Tony Terrell Robinson, 30, each face one count of conspiracy to defraud the United States and 10 counts of false claims against the United States, according to a grand jury indictment that the Department of Justice has unsealed.

Agents from the Internal Revenue Service's Criminal Investigation Division allege that from October 2009 through approximately September 2010, Tetzlaff and Robinson conspired to prepare and file false federal income tax returns and fraudulently claim tax refunds while they were inmates at the Minnesota prison in Faribault, about 50 miles south of Minneapolis.

Other inmates recruited

As part of their scheme, the defendants allegedly recruited other state prisoners to file false tax returns using their names and Social Security numbers, according to a Department of Justice statement about the charges. The defendants and three other co-conspirators who weren't in jail then allegedly filed the tax returns using false wage and federal income tax withholding information.

Tax refunds based on the fake filings were sent out by the IRS as checks, directly deposited into bank accounts or loaded onto debit cards, with alleged tax fraud scheme ringleaders Tetzlaff and Robinson getting a cut of the profits, according to the indictment.

All three of the alleged conspirators who weren't behind bars pleaded guilty earlier this year to conspiracy charges, according to the Justice Department. One was sentenced earlier this month. The other two are awaiting sentencing.

Prisoner tax fraud not new

I know. You're shaking your head at how inmates could conduct tax fraud. Sadly, it's not a new phenomenon.

In a December 2012 report, the Treasury Inspector General for Tax Administration found that the number of fraudulent federal tax returns filed by prisoners increased from more than 18,000 tax returns in 2004 to more than 91,000 in 2010.

The fake refunds claimed on those false filings also grew over that period, from $68 million in 2004 to $757 million just six years later.

"Refund fraud committed by prisoners remains a significant problem for tax administration," said the TIGTA report back then. No kidding.

Part of the problem then, according to TIGTA, was an inaccurate list of prisoners maintained by the IRS. The agency's file contained incomplete inmate records, noted the report, and not all prison facilities provided information on their inmates.

Prisoner tax information exchange enhanced

Since then a federal law has been enacted to help stem the flow of fraudulent tax refunds to prisoners.

On Oct. 12, 2011, the United States-Korea Free Trade Agreement became law. One of that law's provisions mandates that the Federal Bureau of Prisons and all state facilities provide a list of inmates so they can be cross-referenced with names and Social Security numbers on tax returns.

Before this law was enacted, this information was sent by prisons to the IRS voluntarily, which meant a number of people slipped through the cracks because of missing or inaccurate information.

Obviously, there still are a few holes in the tax fraud net. However, every effort to stop tax fraud, both by prisoners and crooks not yet caught, is welcome.

And while Uncle Sam isn't likely to recoup the almost half million dollars in refunds that this group allegedly scammed while in jail, I suspect these Minnesota inmates soon will be extending their stays at the Graybar Hotel.

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Veteran contributing editor Kay Bell is the author of the book "The Truth About Paying Fewer Taxes" and co-author of the e-book "Future Millionaires' Guidebook."

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7 Comments
Debbie Greer
September 10, 2014 at 6:17 pm

I've know of thousands of dollars coming to Tennessee Inmates & they send the checks to someone outside the prisons to get them cashed,,it's been going on around this area for over 20 years...I never would cash 1... Don't care how much they offered me.

Jim
August 23, 2014 at 1:05 pm

You'll need an active 24/7 accounting for "Correctional" facility's at the county level as inmates there are in and out of jail at various times throughout the year, some without sentencing, and anywhere from 30 days up to 5 years.
It would be difficult to keep track of such a wide range of "hotel" stays.

Ward
August 23, 2014 at 7:23 am

All mail going into and out of prisons should be verified by staff. There should be no mail privacy while an inmate is in prison.

Sam Malone
August 23, 2014 at 3:30 am

The IRS should have matched the returns to 1099's or W-2 before they sent the money. Isn't that the way it is suppose to happen? Bernie Madoff my rear!!!!!

Glen
August 22, 2014 at 7:18 pm

All tax returns being mailed from a prison should be verified by staff. With all the info they have on an inmate it would be very easy to spot a false return.

Bernie Madoff
August 22, 2014 at 11:48 am

Hmmm

I wish I would have though of that...

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