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Woman Sentenced for Claiming $2.1 Million Tax Refund

July 26, 2012

An Oregon woman who claimed a $2.1 million tax refund and received it from the state has been sentenced to five and a half years in prison, but she’s not the only one in trouble.

Krystle Marie Reyes pleaded guilty Tuesday to tax evasion and fraud charges, according to the Associated Press. She claimed the tax refund on a debit card and spent approximately $150,000 before she reported that the card was missing. So far, the state of Oregon has managed to recover $1.9 million of the refund money. But Reyes spent some of it on a 1999 Dodge Caravan, tires, an air mattress, an air conditioner, a deep fryer and a rug.

She had filed her taxes in January using TurboTax, claiming she earned more than $3 million. The $2.1 million tax refund claim was initially flagged for review by the Oregon Department of Revenue’s automated system, but employees overrode the warning signs and allowed the refund to be issued anyway.

The case led to an investigation of how the employees ever let such a major fraud slip through the system. On Wednesday, the department announced that it was disciplining four of its employees, demoting one of them and taking formal disciplinary action against the other three. Two of the employees are line staff members and two are managers.

"Several internal controls weren't working as they should,” Department of Revenue Director Jim Bucholz said in a statement. “We're making immediate changes to our processes so we can be confident this won't happen again.”

The error occurred in the Suspense Unit of the department's Personal Tax & Compliance Division. That unit is charged with manually reviewing tax returns that have been "suspended" by Revenue's automated processing systems because they appear to contain errors or fraud.

The Department of Revenue has reassigned two of its Personal Tax & Compliance Division employees to other positions in which they will no longer have the authority to approve cash refunds. Two other employees in the unit were subjected to disciplinary action but were not removed from their current positions.

The audit found the employees did not follow departmental policies and procedures during the initial processing and subsequent review of the fraudulent return. But the auditors found no evidence that the employees engaged in criminal activity or colluded with the fraudulent filer.

The Department of Revenue said it has already modified its computer system so only high-level officials can sign off on tax refunds that appear to be too large. The system also now creates an audit trail to verify the manager who has conducted the final review of such a refund.

Comments (1)
"Several internal controls weren't working as they should," ... Umm! Hmm! You think?
Posted by EnrolledAgent | Friday, July 27 2012 at 6:50PM ET
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