Posted on April 10th, 2013 No comments
Identity thieves thrive at tax time, but the IRS is cracking down.
Last-minute tax filers used to just fear that they’d owe far more money than they could afford. Oh, for the good old days.
Now, taxpayers also worry about what happens if their tax return is automatically rejected as we near April 15 because an identity thief already filed a fake return for a fat, fraudulent refund.
Earlier this year, IRS auditors and criminal investigators visited 197 money service businesses in 17 high-risk areas nationwide to make sure the check-cashing centers were not assisting in refund fraud when they cash tax refund checks.
Identity crooks typically file early. The fake return means that the real taxpayer will face a much longer wait for a tax refund — and more headaches.
Betty L. Harris has no idea how anyone got ahold of her ID to file a fake tax return in 2012. What she does know is that she sat for three hours at the IRS resolution center in downtown Detroit in early February to figure out how she’d file her return this year.
She paid $4 for parking, drove about 25 miles one-way and left unable to e-file her return then.
“I did everything they asked me to do,” said Harris, who lives and works in Clinton Township.
But Harris, 57, was dealing with extra paperwork headaches a full year after crooks filed a fake tax return for 2011. Harris had to wait about eight months, until October last year, to receive her refund of about $3,000.
Despite multiple crackdowns and convictions, the tax headaches continue. The total extent of tax refund fraud using stolen identities unknown.
What is interesting is how many individuals were not simply sloppy with how they protected their identities. “Often times, these are innocent taxpayers who don’t even know they’ve been victimized,” said U.S. Attorney Barbara McQuade.
Thieves may hack into computer systems or paper files at schools, employers or financial institutions. Or they can trick taxpayers on the phone into revealing too much information, according to the Government Accountability Office.
Or thieves steal mail that has financial information out of a mailbox, or they dumpster dive for paperwork that’s been thrown out, McQuade said.
In previous identity theft cases, McQuade recalled one scam where thieves would target cars at fitness centers, knowing that people felt safer locking their wallets in a car than taking the wallet into the gym.
The thief in this case would copy credit card numbers and leave the cards in the wallet in the car.
Leave a Social Security card in a wallet and the thief could copy that number, too.
Since the start of 2013, the IRS says, it has worked with victims to resolve and close more than 200,000 cases of identity theft.
That’s in addition to an expanded Identity Protection personal identification number (PIN) pilot program to protect victims in previous tax-related identity theft cases. The IRS said it has issued more than 770,000 identity protection PINs to victims at the start of tax filing season.
The IRS had identified almost 642,000 incidents of identity theft as of Sept. 30, 2012, that impacted the tax administration in 2012 alone, according to the U.S. Government Accountability Office.
One more scary number: The IRS said in fiscal 2012 the agency prevented issuance of more than $20 billion in fraudulent returns – up from $14 billion the year before.
But another government agency estimated in July that $5.2 billion in bogus refunds could be getting through in a year. The IRS said the estimate is too high.
Federal authorities announced an identity theft crackdown in metro Detroit in early February that included charging six people in federal court. One person was in possession of more than 50 credit cards and more than 100 pages containing names, dates of birth, Social Security numbers and addresses.
The fraudulent returns produced fraudulent tax refunds of more than $2.3 million, according to the Detroit charges. The investigation included the IRS, the U.S. Postal Service and the Secret Service.
Quite often, a con artist is targeting large batches of identities at once.
There are reports in other states of criminals who have their girlfriends get jobs in medical offices to steal Social Security numbers that can be used to file false tax returns that are crafted to generate large tax refunds.
“This is becoming a bigger and bigger tax problem,” said Adam Levin, chairman of Identity Theft 911.
While the IRS is trying its best to crack down, Levin said, criminals are targeting fake tax refunds as a way to make money. Fake returns are designed to generate fraudulent refunds around $1,500 to $4,100 a pop.
Where are the thieves stealing identities? The IRS shows some interesting examples:
Frantz Auguste, an owner of a Florida dry cleaner, was sentenced to 45 months in prison on March 1. The dry cleaning business in North Miami Beach was searched in October 2012 where handwritten notes with Social Security numbers of about 100 people were found.
“Several of these lists appeared to have originated from a local nursing home and rehabilitation center,” according to the IRS summary.
In a case in Alabama, the IRS noted that Natacia Webster, who was sentenced to 50 months in prison and ordered to pay $113,000 in restitution had been an employee in the central records office of an Alabama state agency. She stole information from state databases, according to the IRS.
A Chicago man, Yair Berkowitz, was sentenced to 62 months in prison and ordered to pay about $4 million in restitution. He reportedly submitted fake state and federal tax returns using identities of prisoners and the deceased from 2003 to 2009.
Elsewhere, more than 100 U.S. Marines were hit in one tax-related scam, many of whom were serving in the same unit in Afghanistan as the ID thief.
Another tax fraud involved a stolen warrant book from the Memphis Police Department.
Two people in Detroit, Valerie Butler, 48, and Gary Young, 25, allegedly worked together to file at least 299 false returns, which generated refunds of more than $1 million, according to a statement by the IRS and the U.S. Attorney’s office in Detroit.
The federal government charged that Butler and Young attempted to hide their involvement by failing to sign the returns as preparers.
The 12-count indictment involves false tax returns filed from 2009 to 2011.
“Butler and Young had all of the refund money deposited to bank accounts they controlled,” the statement said.
“They split the refund money with some taxpayers, but most of the taxpayers never received any of the refund.”
And what about the identities of children?
How many children under the age of 14, after all, are walking around with Social Security cards in their backpacks? But questionable tax returns filed for 2010 that appeared to be filed by an identity thief showed that 2,274 children under age 14 had almost $4 million in refunds issued, according to November testimony by the Treasury Inspector General for Tax Administration before a subcommittee of the House Oversight and Government Reform Committee.
The IRS is attempting to lock such accounts and add more filters.
For Harris to clear up the mess, she went to the DTE Energy offices in Detroit to get proof that she lived in her house, she called Social Security offices, she went to the police station to report the ID theft, and she called the credit bureaus and the Federal Trade Commission.
By March, she figured out a way to file by mail – not e-file.
“It’s a lot of running around,” said Harris, who works at a nursing home.
Seven Tips To Avoid ID Theft During Tax Season:
- Your identity may have been stolen if the IRS notifies you that someone has already filed a return using your information. Another bad sign: If the IRS notifies you that you were paid wages from an employer where you did not work.
- If you think you may be at risk for identity theft due to a stolen wallet or questionable credit activity, contact the IRS Identity Protection Specialized Unit at 800-908-4490. A taxpayer guide to ID theft is on the IRS web site www.irs.gov.
- Run the other way, if a tax preparer asks you to sign a blank return. Never sign a blank tax return.
- Skip using the Wi-Fi at a coffee spot, hotel or fast food location to file tax returns online.
- Some tax apps require users to take a photo of a W-2 form, but you want to make absolutely sure to delete that image afterwards, according to the Experian ProtectMyID’s list of tips for tax time.
- Do not leave your tax returns or any of the key paperwork in the car, on the kitchen counter or on top of the desk at home. It’s too easy for thieves to get your information.
- Take a look at your Social Security earnings statement each year. If that number is off, you need to connect with the IRS immediately, said Adam Levin, chairman of Identity Theft 911.