The Identity Theft of Tax Refund Fraud has become a huge problem costing billions of dollars.
Thieves are stealing taxpayer identities – particularly their social security numbers – and then filing bogus returns to get the refunds.
The IRS says that for 2012 they had 3 times the number of criminal investigations that they did in 2011.
The thieves are very brazen, and consider this crime to have low risks and high rewards.
An accountant in Atlanta had her office broken into. The thieves took her computer, which had tax information and social security numbers of her clients.
Then the crooks started filing tax returns using those social security numbers. Many of her clients’ returns were rejected by the IRS because someone had already filed using their Social Security number.
You can’t get the IRS to “flag” returns, even if you know social security numbers and tax records were stolen. The IRS says they have to wait until a false return is filed before they do anything.
In another scam, identity thieves used Social Security numbers of dead babies to file false tax returns and get refunds.
Some thieves are very sophisticated and send out bogus returns in bulk. They don’t even bother to change the mailing address. There was one address in Michigan that was the source of more than 2000 returns claiming more than $3 million dollars in refunds.
Another address in Illinois was the source of more than 700 returns seeking about $900,000 in refunds.
Florida is said to have an epidemic of false tax returns. A Democratic Representative (Kathy Castor) in Tampa introduced a bill that would allow the IRS to share tax information with local police.
Of course, once tax refund fraud happens, many people find it a bureaucratic nightmare to get their tax refund back and their identity restored.
The IRS does have a special web site:
and a toll free number to call: 800-908-4490 (IRS ID Theft Line)
There is also a form they want you to fill out – Form 14039 – Identity Theft Affidavit, if you are the victim of identity theft.
Then they give you a special PIN number, but these PIN’s are only given once a year in December. The IRS says it isn’t practical to give every taxpayer a PIN number
I don’t think President Obama will spend much money to combat tax refund fraud, but he is seeking $100 million dollars for brain research.
Things you can do to help prevent this fraud:
- File your tax return as early as possible. That way a thief can’t get your refund. Also, you’ll probably get your refund quicker because you’ll beat all the people who wait until the last minute to file.
- Don’t give your social security number to every business who asks for it. Many places don’t really need it, but still ask for it.
- Don’t ever give out your social security number over the phone or in response to an email, even if the email looks “official”.