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.
FT. LAUDERDALE (CBSMiami) – A 30-year old Ft. Lauderdale man found guilty of a identity theft tax refund scam will be sentenced this June.
On Monday, a federal jury in Miami convicted Lee Dale on six counts of making and presenting false income tax returns for refunds to the IRS, two counts of depositing fraudulently obtain tax refund checks and two counts of aggravated identity theft.
Prosecutors said Dale filed nearly 300 handwritten tax returns, claiming more than $2 million in refunds, between 2006 and 2009. He used stolen identities and had the checks sent to P.O. Box address.
Although the IRS was able to prevent refund checks from being issued on most of these claims, approximately $195,000 in refund checks were mailed to Dale’s P.O. Box. Several of these checks were deposited directly into bank accounts bearing both Dale’s name and the identity theft victim’s name. Other checks were cashed at a check cashing store in Oakland Park in exchange for cash and money orders that he then deposited into his own accounts.
Dale faces a maximum sentence of up to 10 years in prison on each count of theft of government funds, up to 5 years in prison on each count of making and presenting a false claim to the government, and two years consecutive to the other sentences on the aggravated identity theft charges.
WASHINGTON — The 2014 budget proposal to be released by the White House on Wednesday will include new steps to combat what the Internal Revenue Service says is an exponential growth in tax refund-related identity theft.
A preview of the measures provided by administration officials Tuesday includes increasing criminal sentences for those convicted of tax-related identity theft and creating new civil penalties for those who file fraudulent returns.
The IRS would be able to assess a $5,000 civil penalty for each incidence of identity theft.
Under the plan, the government would also limit access to Social Security Administration files on deceased individuals that have been used by those seeking fraudulent refunds. Instead, the files that the SSA compiles would be available immediately only to those who legitimately need the information for fraud prevention purposes. All other users would have to wait three years for access.
The proposal would also revise the W-2 form that employers must provide the IRS so that it includes an “identifying number” for each employee rather than the employee’s Social Security number.
As of the end of 2012 the IRS had more than 3,000 employees working on identity theft issues, more than double from the previous year.
The tax agency says that in 2012 it prevented $20 billion in fraudulent returns, including those related to identity theft, compared to $14 billion the previous year. It says that it stopped 5 million suspicious returns in 2012, up from 3 million in 2011.
MIAMI (CBS4) – With the April 15th tax deadline less than two weeks away, hundreds of thousands of taxpayers are still waiting for last years’ refunds.
So what’s the problem?
South Florida is ground zero for the worst tax refund identity theft rate in the country.
Ways To Protect Yourself From Identity Theft
CBS4 Chief Consumer Reporter Al Sunshine found there is some new help for victims to finally get their money back from Uncle Sam.
Laurie King said she was worried about filing her 2012 tax return after someone filed a fraudulent tax return using her name last year.
“There’s not one person that I’ve talked to that hasn’t been touched by it or knows somebody who’s been touched by it,” said King.
It took almost a year for the South Miami-Dade waitress to get her money back from the IRS after the scammers stole her refund. She said she really needed that check to help pay some bills.
“Finally, 50 weeks, almost a full year. I think it’s preposterous. I really don’t think it should have taken that long,” said King.
It turns out King was not the only one on the waiting list. The IRS recently revealed it had a backlog of about 300,000 identity theft victims still waiting for their refunds.
What To Do If Your Identity Was Stolen
Pembroke Pines teacher Joan Rubenstein was scammed twice – in 2010 and 2011.
“I was in more shock because they said they were going to red flag it and it shouldn’t happen again and it did,” said Rubenstein.
Like Laurie King, the IRS delayed sending out Rubenstein’s legitimate refund for almost a year.
What would she like to tell the taxman?
“I would like to tell them that it’s horrible that it’s happening. It’s our money, they’re paying out twice. People don’t have the money to throw away like that and they need to figure out a way to make it better,” said Rubenstein.
Broward financial planner Ron Myers believes the blame for this latest nationwide scam and delays in returning victims’ refunds was triggered by Congress itself.
“You’re seeing people with anywhere from a 6 to a 14-15 month wait for a refund,” added Myers.
“In your opinion has Congress made it too easy for criminals to scam the IRS and scam taxpayers,” asked Sunshine.
“Clearly. Clearly without question,” replied Myers. “I think the Congress is eager to get people their refunds. The IRS has in many cases antiquated systems. The IRS has not caught up with the electronic age, they’re trying.”
“And as a result what are we seeing,” asked Sunshine.
“We are seeing a tremendous amount of fraud to the tune of billions of dollars,” said Myers.
U.S. Representative Debbie Wasserman Schultz doesn’t think Congress caused the problem. She’s just introduced new legislation which would increase penalties for anyone filing a false taz return. The measure, however, doesn’t include requiring the IRS to speed up getting refunds back to victims like King and Rubenstein.
“Getting the refunds back is important, but what’s more important is stopping the crime,” said Wasserman Schultz. “I’ve filed legislation called the Stop Taxpayer Identity Theft Act which would increase the penalties on criminals who steal taxpayer identities and make it significant easier for them to get caught committing those crimes.”
With Wasserman Schultz’s help, Rubenstein was finally able to get her refund back and a get a special security code from the IRS to prevent future thefts.
After CBS 4 contacted Senator Bill Nelson about King’s problem, his office was finally able to get the IRS to speed up her case and finally process her refund.
“You did fantastic, I’m relieved, I can breath again. I don’t have to worry about this, it’s done, it’s taken care of,” said King.
If you’ve been the victim of identity theft and are still waiting for last years’ refund, you should contact your representatives in Washington D.C. to see if they can help speed up the process with the IRS.
You also need to file an identity theft affidavit with the IRS and FTC, and contact the national credit bureaus to put a fraud warning on your account.