You open the letter from the IRS, and it is the dreaded one. No, not that one, this one reads “You filed more than one tax return or someone has already filed using your information.” Whoa! You thought you did everything right. Chances are you did, well almost. You most likely have joined a not-too-exclusive club of some 16 million victims of tax return identity fraud.
Tax return fraud is a gold mine for bad guys. Because of IRS puzzling systems, it is all but impossible to spot a fraudulent return before it gets paid. For information about those systems, see the Nov. 14, 2015 USA Today article. So if a crook files early, as the bad guys do, say in January or February, by the time the real taxpayer files, the bad guys have the money and the taxpayer who is owed the money gets the “letter.” In fact, the IRS has such poor fraud checks that it didn’t discover that five addresses accounted for 4864 fraudulent returns. That must be one huge apartment complex. It wasn’t until they started investigating tax fraud that they discovered those five addresses.
Yes, the right person can get the entire thing straightened out, but the average time for the refund to get to the right person is 312 days, reports the US Treasury Inspector General.
The money is great for the bad guys, too. Says the General Accounting Office, in 2013 the IRS paid out $5.8 billion in bogus refunds. As an item of interest, five categories account for some 1,492,215 phony returns. First is the deceased, 104,950 returns. Elderly account for 76,388, citizens of US possessions 76,338, students 16 to 20, 252,288, and children under 12, 2,274 returns.
Back to the “doing everything right.” No, it isn’t the fault of the person who is the victim of tax return fraud. Being the victim of a crime is rarely the fault of the victim. But the bad guys do get the necessary information to pull off the fraud. All they need is the name and Social Security Number of someone to create a fraudulent return.
How do they get those? The name is easy, but the Social Security Number is more difficult and so often they buy them from other crooks. The price of buying a Social Security Number is far greater than the cost of say buying a credit card number. After all, a stolen credit card is good for only a few purchases before the issuing bank puts a hold on the account. But a Social Security Number. . . Wow! That can be used not just for phony tax returns but also for obtaining credit and credit cards. And it is likely to be months before anyone notices, and then only after the victimized party gets letters from the IRS and bills for credit cards he or she never applied for.
If they don’t buy Social Security Numbers, though, they are ever on the lookout. I recently filled out forms at two different doctor’s offices where they asked for my Social Security Number. No, I did not give it to them. They have absolutely no need for it, only the insurance information. But some people, who are far more trusting than I am, willingly fill in their Social Security Numbers. After that, there are any number of ways for bad guys to get that number ranging from hacking the doctor’s database to seeing the actual form with the number on it to paying off employees to provide that information.
Once they have the necessary data, the fraudsters make up fake W2s, create a tax return online, and file electronically. They file electronically almost exclusively, for one thing because it is far more efficient. By the time the IRS figures out the return is a phony, it’s too late.
There is no absolutely, foolproof way to protect in advance against tax return fraud. That comes after the fact when the IRS provides a form that ensures every tax return from an individual will be screened. For complete details about that, visit irs.gov and search for tax fraud. All we can do is protect our private information the best we can.
By Robert L. Cain