U.S. crackdown stops $1.4 billion in bad tax refunds

(Reuters) - A U.S. government crackdown on suspected identity thieves filing false tax returns stopped $1.4 billion in bad refunds from being sent out in 2011, the Internal Revenue Service said on Tuesday.

The IRS and Justice Department stopped 260,000 bad returns last year, IRS Deputy Commissioner Steve Miller said.

"There is no doubt in the last couple of years this rate of fraud has gone up," Miller told reporters.

In 2010, there were fewer than 50,000 such returns, involving $262 million.

A national sweep by the two agencies over the last week targeted 105 people in 23 states and led to 939 criminal charges in 69 indictments related to identity theft. Some of the investigations stretched back years.

Arrests were made Friday in Michigan, Ohio, New Jersey and New York, where three employees of JPMorgan Chase Bank were charged by the Manhattan U.S. attorney with taking kickbacks in a $4.8 million tax refund scam that used the identities of Puerto Rican citizens.

Law enforcement agencies said other schemes involved stealing the identities of dead taxpayers and mentally disabled people.

The IRS also went to numerous check-cashing operations across the country to ensure that they were not involved with refund fraud and identify theft.

(Reporting By Nanette Byrnes; editing by Mark Porter)