IRS crackdown: Tax cheat caught claiming 20 bogus kids

September 7, 2011: 2:47 PM ET

NEW YORK (CNNMoney) -- Tax fraudsters are getting more creative -- and, in some cases, more daring. But the IRS is making it harder for them to get away with their tricks.

Late last week, a Los Angeles woman pleaded guilty to filing tax deductions for at least 20 fictitious children -- which she claimed were all born on the exact same day -- in order to land a $300,000 refund, according to the United States Attorney's Office of Los Angeles.

Norma Coronel, 40, admitted to obtaining Social Security numbers for the 20 fabricated children and having the money sent to her residence and to bank accounts she controlled, according to the Attorney's Office. She faces a maximum sentence of 18 years in prison and a maximum fine of $750,000.

Coronel isn't the only one who has been trying to game the system.

Deducting pornography and emu feathers

Fraud investigations initiated by the IRS jumped 14% year over year to 4,706 in fiscal 2010. Meanwhile, prosecution recommendations -- cases that the IRS believes should be brought to court -- climbed 18% and convictions rose 4%, according to IRS data.

While a bad economy and stubbornly high unemployment may lead more people to try to defraud the government, the IRS has done a better job of cracking down on this type of crime, according to a recent audit of the IRS conducted by the Treasury Department's Office of Inspector General for Tax Administration.

Although special agent staffing remained nearly flat at 2,752 agents in 2010, the agency's Criminal Investigation division cut its investigation time by nearly 9% -- from an average 401 days to complete an investigation in 2009 to 365 days in 2010, according to the inspector general.

Confessions of extreme penny pinchers

The inspector general attributed the improvements to fraud and compliance training, as well as increased outreach with other IRS divisions which has helped investigators flag more potential frauds.

With ramped up enforcement, taxpayers may want to think twice before fudging their taxes. Here are some of the high-profile cases the IRS has pursued so far this year:

Last month, a Detroit strip club owner was sentenced to 12 months in prison and ordered to pay $6,000 in restitution after pleading guilty to using a computer software program to delete sales records from his two strip clubs' sales database, according to the IRS.

The defendant was hoping to make it appear as if the clubs earned less than they actually did by understating about $500,000 of gross receipts.

Celebrity rapper Ja Rule, whose real name is Jeffrey Atkins, was sentenced to 28 months in prison after admitting that he didn't pay his taxes for five years. His tax evasion resulted in $1.1 million in tax losses, which Ja Rule has agreed to pay -- in addition to the penalties he owes, according to the IRS.

In Chicago, the owner of three "gentlemen's clubs" was nailed by the IRS earlier this year for hiding $12 million in cash in a warehouse to avoid paying taxes on the money.

Another man was convicted of trafficking and selling counterfeit Nike shoes from China and underreporting his annual shoe sales as $22,262 in 2008, when he really earned $293,549.  To top of page

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