Lawmakers renew push for legislation to prevent $5 billion tax ID fraud.

Tax Day is no longer just a deadline for citizens to rush and file their returns. It’s now a day for members of Congress — Democrats and Republicans alike —to file legislation or announce ways to prevent an estimated $5 billion in tax-identification fraud, which is particularly virulent in Florida and especially South Florida.

The effort by local lawmakers is nothing new, nor is the fact that the measures have died year-after-year in a do-nothing Congress.

On Monday, Miami-area Reps. Debbie Wasserman Schultz, Joe Garcia and Ileana Ros-Lehtinen all promoted legislation to put an end to the practice. Florida Sen. Bill Nelson announced a bill last week.

“Something needs to be done,” said Jon Simpkins, a Miami-Dade businessman who appeared with his wife, a tax-ID fraud victim, at Garcia’s press conference.

It took the Internal Revenue Service until April 8 to supply the family their tax-refund money from last year — a week before this year’s tax-filing deadline.

“I’m surprised they haven’t fixed this yet,” Simpkins said, detailing the delays and difficulties of just getting the IRS to do its job.

But the delay in fixing the growing problem isn’t just a window into the problems with the IRS. It’s an example of a broken Congress that struggles to accomplish the most-basic of tasks — including an issue members of all parties agree on: Stopping fraud.

Last year, for instance, Sen. Nelson’s crackdown bill stalled and died in the Senate because leadership said it didn’t want to deal with any new tax issues or tax reform — except for figuring out what to do with the then-expiring payroll tax cuts and the so-called Bush tax cuts.

So even though Nelson’s bill was more of a fraud-fighting proposal, it was considered tax legislation. And it was bottled up by the advent of the so-called “fiscal cliff” and budget-sequester negotiations. The bill could face another challenge this year: the banking-and-credit industry.

Nelson wants to make it tougher for thieves to get tax refunds electronically direct-deposited on prepaid debit cards. The cards have become increasingly common ways for regular citizens to get their returns credited to a bank account electronically. But, because the cards can be purchased by phone or internet and leave few fingerprints, scammers use them as well.

Tax ID fraud is simple and lucrative. Thieves purchase Social Security numbers and names of people on the black market. Then they download tax forms electronically, plug in the stolen information and file false returns. They request refunds be sent to prepaid cards or, less often, by check.

The scam is usually pulled in January and February. Most citizens file weeks or months later. If someone used their information on a tax form, the IRS then refuses to instantly pay the citizen as it did the scammer. Victims then wait for months or, in Simpkin’s case, almost a year for their refund.

Broward Sheriff Detective Mitch Gordon warned that cracking down on debit cards won’t stop the crime entirely. But he said the cards are a good way to steal.

“One time, we had one guy who sat at a Western Union machine for six hours just putting in debit cards, putting in debit cards,” said Gordon, who estimated the office has had 400 complaints this year.

The Miami area is the top tax-related identity theft area in the nation, and Florida has nine of the top 10 cities for the fraud.

South Florida accounted for 35,914 identity-theft complaints in 2012.

“It has happened to so many people,” said Rep. Garcia. “It happened to me.”

Garcia’s bill isn’t as sweeping as Nelson’s. It would change the law to forbid the printing of a person’s entire Social Security Number on a W-2 tax form, a major primary source for thieves who obtained them from unscrupulous employees or employers.

Wasserman-Schultz, a Democrat like Garcia, wants to increase penalties and make federal prosecutors prioritize tax ID cases.

Rep. Ros-Lehtinen, a Republican, is co-sponsoring both bills.

“These bills focus much needed attention to identity theft, a problem that is clearly not a victimless crime,” Ros-Lehtinen said in a statement.

Another Republican Rep., Mario Diaz-Balart, hasn’t studied the legislation but has held IRS officials to account in budget hearings. He tacked on an amendment to a budget bill that requires the agency to better track tax ID theft cases.

With such bipartisan support for such an important topic, Wasserman Schultz, the Democratic National Committee chairwoman, said she hopes something will pass. “It seems like a no-brainer,” she said.

Read more here: http://www.miamiherald.com/2013/04/15/3346174/lawmakers-renew-push-for-legislation.html

Come tax time, many refunds go to identity thieves.

An epidemic of tax-related identity theft continues to plague the Internal Revenue Service despite efforts by the agency and law enforcement officials to combat the fraud, witnesses told a Senate panel Wednesday.

“We are losing $5 billion each year to this crime, and now the problem is getting worse,” said Sen. Bill Nelson, D-Fla., the chairman of the Senate Special Committee on Aging.

Criminals use stolen personal information to file fraudulent tax returns, usually in January, before the real taxpayers have a chance to file. By the time the victims send in their returns, it’s too late: The IRS already has mailed refund checks to the identity thieves. It can take months – even years – for the IRS to untangle the mess and send the taxpayers the refunds they’re owed.

Nine of the 10 U.S. cities hit hardest by the scam are in Florida. The Miami metropolitan area tops the list, with 35,914 cases of tax-related identity theft reported last year and the highest per capita rate of complaints, 645 per 100,000 residents.

Miami was followed by Atlanta, which had 12,992 complaints, Tampa, Fla., with 9,805, and Orlando, Fla., with 4,991.

Nationwide, cases of tax-related identity theft surged 650 percent from 2008 to 2012. In 2011, thieves filed 1.5 million undetected fraudulent tax returns and received $5.2 billion in refunds, according to an audit last year by the Department of the Treasury’s inspector general.

Witness Marcy Hossli, 57, of Lake Worth, Fla., has been a victim of identity theft through tax fraud three years in a row.

“I should never have to go through anything like this, nor should anyone else,” Hossli said. “I feel violated. It’s hard to concentrate in work. I am stressed constantly.”

Hossli told senators she still is waiting for her 2012 tax refund. She suffers from cancer and owes $4,000 in medical bills. “I really need the money,” she said.

Senators expressed frustration that the IRS hasn’t been able to do a better job at catching fraud even though criminals often use the same addresses to file multiple returns.

Republican Sen. Susan Collins of Maine said thieves used the same address in Lansing, Mich., to file 2,137 tax returns, and they received $3.3 million in refunds. An address in Chicago was used to steal $900,000 in refunds through almost 800 fraudulent returns, Collins said.

“Criminal gangs have figured out that it’s cheaper and easier for them to steal taxpayers’ identities and hijack their refunds than it is to traffic in drugs, rob banks or fence stolen property,” Collins said.

“The IRS has an obligation that obviously they’re not meeting,” said Sen. Claire McCaskill, D-Mo. “How in the world can there not be a system in place that the IRS could not catch that they’re sending 2,000 refunds to the same address?”

Tax refund thieves commonly target senior citizens, as well as low-income people and students, who might not be required to file returns.

The audit by the Treasury Department’s inspector general estimated that 76,000 senior citizens likely were victims of tax fraud identity theft in 2010, resulting in $374 million in fraudulent tax refunds.

Victims often have their identities stolen by corrupt employees at nursing homes and hospitals, Kathryn Keneally, assistant attorney general for the Department of Justice’s tax division, said in her testimony before the committee. In other cases, criminals take names from public death lists to file tax returns, she said.

“For the public the risk is clear,” Keneally said. Such crimes “can and do arise in any setting where the lure of fast money puts at risk personal identifying information, including at state agencies, student loan providers, the military, prisons, companies servicing Medicaid programs – the list is growing all too long.”

Postal workers have been compromised, robbed and in one case killed in order to steal refund checks, she said.

Prosecuting tax-refund identity theft is a national priority, she added.

Legislation Nelson introduced this week would increase jail time and fines for people convicted of tax-related identity theft and direct the IRS to close identity theft cases within 90 days. Last year, it took an average of 196 days for the IRS to close such cases.

The delays are unacceptable, Nelson said. He said victims of identity theft shouldn’t have to wait six months for their refunds, much less two years, as at least one woman in Parkland, Fla., had to do.

“Many Americans rely on getting those tax refunds back so they can pay their bills,” he added.

Nelson’s bill, co-sponsored by fellow Democratic Sens. Dianne Feinstein of California and Charles Schumer of New York, also would ensure that victims don’t have to explain their plight to different IRS employees every time they contact the agency. Instead, the IRS would give each victim a single point of contact to help track the case.

Other provisions include restrictions that would make it harder for thieves to load stolen refunds onto prepaid cards, language that allows identity theft victims to opt out of electronic filing and prohibitions on printing Social Security numbers on Medicare ID cards and communications.

(source)

At Least 1,000 Current or Former Miami-Dade Students Were Victims of Tax Fraud Scheme

A gang called the North Miami Boyz stole the identities of current and former Miami-Dade students to file at least 1,000 fraudulent tax refunds, police said.

Authorities said they know of at least $1.6 million in returns that were filed in the identity theft and tax fraud scheme. According to an indictment, the North Miami Boyz carried out their scheme from about January 2010 to December 2011 – but police warn that the source of the students’ personal data still hasn’t been determined.

Investigators said the group portrayed themselves as music industry moguls, flashing jewelry and big cash, but it was all a front for the tax fraud scheme using students’ personal information to get tax refunds.

“Every single victim that we came across was either a current or former student of Miami-Dade public schools,” North Miami Beach Police Detective Craig Catlin told NBC 6. “So there is a point of compromise with the Miami-Dade public school system.”

Lesley Dunn, a former student at Palmetto Senior High School, was one of the victims.

“My information was exposed (through) the county schools, and my identity was stolen,” she said.

Dunn said police came to visit her when she was a student at Palmetto Senior High. Someone had gotten a hold of her private personal data, filled out a tax return and even received a refund – all by posing as her.

“There was a ring of thieves, I guess you would call it, associated with the Dade County school system, that had been stealing IDs or Social Security numbers,” said her mother, Debbie Dunn.

She was just one of many teens victimized, according to police.

“They probably did at least a thousand fraudulent refunds,” Catlin said. “But they attempted a lot more than they received.”

Federal prosecutors took the North Miami Boyz – identified by authorities as Willman Philidor, Alland Philidor, Frantz Plantin, Frantz Desir and Arthur Blain – to court after their arrests on tax fraud charges. They entered guilty pleas and are now in federal prison.

Catlin said the estimated 1,000 victims so far are at multiple schools. Social Security numbers were just part of the personal information obtained, and the students were given fake jobs on the tax returns so the IRS would process the refunds.

“The IRS, as far as I know, cannot flag your name to prevent a fraudulent return from going through,” Catlin said.

Federal agents and police said the North Miami Boyz also set up fake businesses to take in the tax refunds filed from the returns using in the students’ data.

“They actually set up business accounts pretending to be actual businessmen and they did fraudulent returns on the computer,” Catlin said.

Catlin said the source of the students’ personal data hasn’t been determined, and students across the public school system are still at risk of having their identities stolen too. Police are still investigating “the point of compromise from the school system,” he said.

A Miami-Dade County Public Schools spokesman sought to reassure parents about the safety of their kids’ information.

“Approximately two years ago the school district took very swift, decisive action to limit access to student information at all school sites,” said John Schuster, the school district’s chief communications officer, in a statement. “This highly effective, multi-pronged approach should help parents feel confident that their children’s information is secure.”

Now, students and former students like Lesley Dunn are going to have to wait and see what impact the scheme could have on their credit and finances.

“I don’t really know how it’s going to affect me later in life, but hopefully nothing horrible,” Dunn said.

(original source)