The department is matching tax returns with property transactions.
The average amount people owe to the MSD after getting grants or advances to cover basic living costs has doubled in the last five years.
But employers can give workers an optional tax-free payment each week.
Some Kiwis thought they were being deprived of much-needed tax refunds.
Newshub called Kiwi companies to count down to the most bearable.
"Unfortunately, malicious attacks of this nature are becoming more common both in New Zealand and globally."
Inland Revenue said the arrest was a "last resort".
"She was trying to get money she knew she wasn't entitled to."
More than 900 reports of the hoax have been received.
The department is refusing to hand it the money it took back.
But the 550,000 who underpaid tax will have to pay it back.
Treasury is putting it down to a transition to a new Inland Revenue system.
Taihia thought the $12 million was the $12,000 she was expecting.
The botch-up comes as the IRD is trying to simplify the tax system.
She says IRD has frozen her account after the payout.
The harrowing story of a young woman retraumatised for nearly a decade.
Tax refunds will soon be automatic and online.
The IRD is getting ready for a busy financial year.
He could also owe interest and costs of $60m.
They're telling targets there's a warrant out for their arrest.
"We need a tax system that's fair."
Hayden Jones didn't hand over $381,325 in PAYE deductions.
Refunds will be sent out automatically.
Close to 3000 workers will down calculators.
They have had about 700 notifications about the scam.
The Public Service Association said people will see delays due to the strike.
More than 4000 MBIE and Inland Revenue workers will walk off the job next month.
Police are warning Kiwis to ignore the calls.
All five of the companies he involved in the offending are now in liquidation.
They have serious concerns for thousands of staff working for Inland Revenue
