Refund Tax Compliance Frequently Asked Questions
1. What is the Refund Tax Compliance (RTC) Office?
The RTC Office is a tax compliance office focused on stopping the issuance of fraudulent refunds to state and federal inmates. The office is part of the IRS Wage & Investment Division.
2. Why was the Refund Tax Compliance (RTC) Office established?
The RTC Office was formed to protect federal revenue against inmate tax fraud, in recognition that tax refund fraud is an area of concern and that inmate refund claims require more scrutiny.
3. How does the Refund Tax Compliance (RTC) Office obtain information?
The RTC Office works closely with state departments of correction and the Federal Bureau of Prisons to obtain external data. RTC analysts skilled in data collection, analysis and fraud detection match this information with internal sources.
4. What are the Refund Tax Compliance (RTC) Office's responsibilities?
The RTC Office’s responsibilities are to:
- collect detailed inmate data from state departments of correction and the Federal Bureau of Prisons, as required by federal law;
- use the collected data, with sophisticated filters, to identify noncompliant returns and situations where identity theft seems likely;
- select noncompliant returns for pre-refund or post-refund audit;
- prevent issuance of refunds to inmates who have filed noncompliant returns;
- work with state and federal prison officials to monitor inmates’ tax-related correspondence for fraud activity;
- make presentations to prison officials and provide training to them to identify tax fraud;
- provide outreach information to prisons to enable inmates who are re-entering the civil community to comply with federal tax laws.
5. What is the Blue Bag program?
Under this program, state and federal prison officials monitor inmates’ returns and other tax-related correspondence as a means of identifying potential inmate tax fraud. Selected items are forwarded to the RTC Office for verification.
6. What is the Korea Free Trade Agreement (KFTA) Implementation Act (Public Law 112-041) and how does this Act affect the Refund Tax Compliance (RTC) Office?
On October 21, 2011, the President signed the KFTA, which Congress enacted to improve the timeliness and uniformity of inmate data. State and federal prisons had provided this information voluntarily in the past. Section 502 of the Act requires corrections institutions to provide the IRS, annually, with information regarding their inmates as follows:
(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).
7. How will the IRS and Refund Tax Compliance (RTC) Office use the KFTA information?
The IRS will use 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 will analyze this data to detect potentially fraudulent returns and to stop fraudulent refunds to inmates. The quality and timeliness of data the 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 RTC Office will work closely with corrections administrators throughout 2012 to ensure smooth implementation of the Act.
8. How can I contact the Refund Tax Compliance (RTC) Office?
The RTC Office’s mailing address and e-mail address are:
Internal Revenue Service
Attn: Blue Bag Program
1040 Waverly Ave
Holtville, NY 11742.
- Refund Tax Compliance
- Refund Tax Compliance Responsibilities
- Korean Free Trade Notification
- Prisoner re-entry program
- Improper Payments