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Korean Free Trade Agreement Notification

New Legislation Supports Efforts to Combat Inmate Tax Fraud

In recent years, federal and state prison systems have voluntarily provided inmate data to the Internal Revenue Service. Congress has enacted new legislation to improve the uniformity and timeliness of this data. On October 21, 2011, the President signed into law P.L. 112-041, H.R. 3080, The United States – Korea Free Trade Agreement (KFTA) Implementation Act. This statute amended 26 U.S.C §6116 to require federal and state corrections institutions to provide the IRS, annually, with information regarding their inmates. Section 502 of the Act provides that:

(a) In General- Not later than September 15, 2012, and annually thereafter, the head of the Federal Bureau of Prisons and the head of any State agency charged with the responsibility for administration of prisons shall provide to the Secretary in electronic format a list with the information described in subsection (b) of all the inmates incarcerated within the prison system for any part of the prior 2 calendar years or the current calendar year through August 31.
(b) Information- The information with respect to each inmate is--

(1) First, middle, and last name,
(2) Date of birth,
(3) Institution of current incarceration or, for released inmates, most recent incarceration,
(4) Prison assigned inmate number,
(5) The date of incarceration,
(6) The date of release or anticipated date of release,
(7) The date of work release,
(8) Taxpayer identification number and whether the prison has verified such number,
(9) Last known address, and
(10) Any additional information as the Secretary may request.

(c) Format- The Secretary shall determine the electronic format of the information described in subsection (b).

The Internal Revenue Service uses the information provided by state and federal prisons to compile and update its inmate data file. This file contains demographic information and the incarceration status of individuals who have been inmates at any time during the previous two years. The IRS analyzes this data to detect potentially fraudulent returns and to stop fraudulent refunds to inmates. The quality and timeliness of data that IRS receives from corrections systems are both critically important to the success of IRS’s prison tax compliance programs.
Under the new KFTA law, the requirement for annual submission of inmate data takes effect on September 15, 2012. The IRS will contact the appropriate agency head with more information in the spring of 2012.


Page Last Reviewed or Updated: 09-Jan-2015