While the Internal Revenue Service is working overtime to send tax cheats to prison, officials at the tax service are discovering that a considerable portion of them are already behind bars.During hearings before the House Ways and Means Oversight Subcommittee, IRS officials confirmed that illegal tax return filing activity by prisoners in state and federal penal institutions has become a rapidly growing problem for the service in the past few years.

Calling the increase in prisoner tax fraud "dramatic," IRS criminal investigation chief Nancy J. Jardini told Congress that although prisoners represent less than one half of 1 percent of all individual federal income tax returns filed in 2004, inmates now account for a whopping 15 percent of all fraudulently filed refund returns detected by the agency.

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