1099 OID fraud is a common scam used to obtain money from the U.S.

Internal Revenue Service The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory ta ...

(IRS) by filing false tax refund claims.

Form 1099-OID In the United States, a Form 1099-OID is a tax form intended to be submitted to the Internal Revenue Service by the holder of debt instruments (such as bonds, notes, or certificates) which were discounted at purchase to report the taxable difference ...

is intended to be submitted to the IRS by the holder of debt instruments (such as bonds, notes, or certificates) which were discounted at purchase to report the taxable difference between the instruments' actual value and the discounted purchase price. In 1099-OID fraud, the filer of a tax return fills out the form themselves with a false withholding amount and submits it to the IRS in an attempt to reduce tax liability. Promoters of the fraud allege that the withheld amount exists in a secret bank account, a claim that originates from the

redemption movement The redemption movement is a debt-resistance movement and fraud scheme which is primarily active in the United States and Canada. Participants allege that a secret fund is created for every citizen at birth, and that a procedure exists to "redee ...

. The IRS initially overlooked the fraud because it lacked time to verify withholding data; however it has since taken notice and responded with both criminal prosecutions and public awareness campaigns. In one egregious case, Ronald L. Brekke of

Orange County Orange County most commonly refers to: *Orange County, California, part of the Los Angeles metropolitan area Orange County may also refer to: U.S. counties *Orange County, Florida, containing Orlando *Orange County, Indiana *Orange County, New ...

, California, was convicted on March 17, 2012, in federal court in

Seattle, Washington Seattle ( ) is a port, seaport city on the West Coast of the United States. It is the county seat, seat of King County, Washington, King County, Washington (state), Washington. With a 2020 population of 737,015, it is the largest city in bo ...

, of

conspiracy A conspiracy, also known as a plot, is a secret plan or agreement between persons (called conspirers or conspirators) for an unlawful or harmful purpose, such as murder or treason, especially with political motivation, while keeping their agree ...

and

wire fraud Mail fraud and wire fraud are terms used in the United States to describe the use of a physical or electronic mail system to fraud, defraud another, and are Federal crime in the United States, federal crimes there. Jurisdiction is claimed by the ...

in which 1,000 people, most of them

Canadian Canadians (french: Canadiens) are people identified with the country of Canada. This connection may be residential, legal, historical or cultural. For most Canadians, many (or all) of these connections exist and are collectively the source of ...

, filed fraudulent United States tax refund claims with the IRS. The scam totaled $763 million, but the IRS paid out only $14 million. Mr. Brekke received $400,000 from his clients.

References

{{reflist Tax fraud Personal taxes in the United States Fraud in the United States Confidence tricks