The Internal Revenue Service distributed roughly $1.6 billion in refunds to taxpayers who filed falsified tax returns in 2006 and 2007, despite efforts to stop them, according to a new report from the Treasury Department's inspector general.

The Treasury Inspector General for Tax Administration found that the number of falsified tax returns filed in an attempt to obtain fraudulent tax refunds increased dramatically between 2006 and 2007. TIGTA blamed the IRS payments on "a failed fraud detection system and insufficient resources to work all the fraudulent returns."

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