State, IRS keep eye on tax filing by prisoners

It appears that many criminals confined in prisons across the U.S. don’t appreciate all that taxpayers and corrections officers are doing to house, feed and rehabilitate them — and that they have too much idle time on their hands.

Large numbers of inmates, including several at Larch Corrections Center in Clark County, have filed fraudulent tax returns and reaped money they weren’t entitled to, according to a Feb. 16 story by Kevin McCoy in USA Today.

The inmates’ tax returns, citing “phantom jobs,” tricked the IRS into issuing $39.1 million in undeserved tax refunds to inmates nationwide in 2009, the story said.

The newspaper also found that such crimes have increased dramatically in the past several years. The newspaper examined data from the IRS, the Treasury Inspector General and the Pew Center on the States for the report.

Inmates in Florida, with a total prison population of about 104,000, stole the most by far — more than $12.5 million,

Losses of $1 million or more were reported in Georgia, the Federal Bureau of Prisons, California, Texas, South Carolina, Illinois, Arizona and Indiana, the story said.

Washington ranked No. 18 on the list, with about $380,000 lost and about 18,200 inmates.

Clark County’s only prison is Larch Corrections Center, a minimum-security facility five miles east of Hockinson, where inmates are sent when they near the end of their sentences. The USA Today story said Larch inmates filed nine fraudulent IRS returns in 2009.

Patricia Gorman was superintendent of Larch from 2000 until she retired at the end of 2009.

“I remember hearing that the IRS was doing some checking,” she said. “There have always been some concerns, that, over time, we needed to be aware of that,” she said recently.

“I don’t remember any specific cases about it,” she said, adding that any cases likely would be investigated by the IRS and filed in federal court and out of her purview.

Larch’s current superintendent, Eleanor Vernell, asked Cheryl Jorban, an administrative assistant at Larch, to research The Columbian’s questions about inmate tax fraud there.

Jorban said she was unaware of any IRS cases that might have been filed against Larch inmates.

The inmates have no access to the Internet, she said.

She said state prison officials are working with IRS officials to find such violations, including some that may have occurred years ago.

“The Department of Corrections Special Investigative Services Unit (SIS) and the IRS have started to actively pursue DOC offenders who had filed fraudulent IRS returns for the years of 2006, 2007, and 2009,” Jorban said.

Another recent policy added more scrutiny to detect possible new violations.

“Beginning January 2010, offenders requesting IRS forms and tax booklets must request the documents through their counselor,” Jorban said, adding that counselors at Larch had reported no such requests from inmates recently.

In addition, she said, “All tax returns for offenders are now forwarded to an IRS special investigation unit for auditing.”

“Additionally, all incoming and outgoing mail is screened to prevent new fraudulent IRS income tax filings.”

Larch is highly regarded statewide for several reasons, including its corrections officers and programs devoted to preparing inmates for release back into the community, hopefully without committing more crimes. The efforts include ways of finding a job when they get out.

Some Larch prisoners also serve on inmate work crews, fighting forest fires and doing other heavy work while supervised by officials with the state Department of Natural Resources.

Broadening the area to Southwest Washington, IRS Special Agent Dan Wardlaw said he’d seen no recent federal cases of inmate tax fraud.

“It’s been around for years, but we take it very seriously and we’re doing everything we can to address it,” said Wardlaw, who also is a spokesman for the IRS and is based in Vancouver.

“In 2009, the IRS stopped 87 percent of improper prisoner refunds, more than $250 million,” Wardaw said, citing nationwide data.

Wardlaw’s numbers square with those of USA Today, which said that, although $39.1 million was wrongly refunded in 2009, inmates had claimed they were owed $295.1 million and federal analysts prevented $256 million from being issued.

“We devote special scrutiny to prisoner returns and are substantially increasing our enforcement efforts in this area,” Wardlaw said. “However, it is clear that more needs to be done.”

Wardlaw added: “The 2012 President’s budget includes a critical legislative proposal to require state and federal prisons to report the status of inmates to the IRS.

“This would allow the IRS to cross reference tax returns with the list of inmates to determine if a legitimate return is filed, before tax refunds are paid. Without this comprehensive data, there will be gaps in the prison data and compliance problems will persist.”

Sheriff: Not an issue at jail

On the local level, Sheriff Garry Lucas said it’s not a problem in the Clark County Jail and Jail Work Center in Vancouver, “Probably because of our relatively short length of stay.”

In general, inmates sentenced to a year or more are sent to a prison facility in Washington, not a county jail.

“Over the past 32 years, I recall about 3 or 4 requests for tax assistance from inmates,” said Clark County Jail Commander Mike Anderson. “It is a rarity that we ever get requests for tax assistance, or requests from families to get returns signed. It really has been a non-issue for us.”

He added, “Inmates do not have access to Internet at either facility just for this reason.”

Jail and work center inmates have had access to computers that weren’t connected to the Internet, to develop keyboarding skills and write résumés.

Also, a program with limited Internet access is being explored, for inmate job searches only, Anderson said. “It would not be unfettered access to the Internet under any conditions.”

Anderson said he’s not aware of any Clark County Jail inmates ever being caught filing false IRS returns.

“If we had an individual who was submitting, filing multiple tax returns at one time, this would create a flag and we would initiate a review of the case if we suspected criminal activity.”

He added, “Individuals historically file these types of scams in a prison setting rather than a county jail, as they have greater resources, and time on their hands.”

The USA Today story cited no such incidents in the Clark County Jail system.

John Branton: 360-735-4513 or john.branton@columbian.com.