Tax refund ID theft is growing 'epidemic': U.S. IRS watchdog

WASHINGTON Thu Nov 7, 2013 6:35pm EST

J. Russell George, treasury inspector general for tax administration, testifies at a House Oversight and Government reform hearing on 'Collected and Wasted - The IRS Spending Culture and Conference Abuses, on Capitol Hill in Washington, June 6, 2013. REUTERS/Jason Reed

J. Russell George, treasury inspector general for tax administration, testifies at a House Oversight and Government reform hearing on 'Collected and Wasted - The IRS Spending Culture and Conference Abuses, on Capitol Hill in Washington, June 6, 2013.

Credit: Reuters/Jason Reed

WASHINGTON (Reuters) - More Americans' identities were stolen in tax refund crimes in the first six months of 2013 than in all of 2012, said a U.S. Internal Revenue Service watchdog on Thursday who described the problem as "a growing epidemic."

Tax refund fraud has exploded in recent years. Scammers typically use stolen names and Social Security numbers to file phony electronic tax forms for IRS refunds.

About 1.6 million Americans were victims of ID theft/tax refund crimes this year through June, up from 1.2 million taxpayers in all of 2012, the Treasury Inspector General for Tax Administration (TIGTA) said in a report.

"Identity theft is a growing epidemic," said J. Russell George, TIGTA's chief.

Democratic Senator Bill Nelson of Florida, a hot spot for these crimes, said in a statement that TIGTA's analysis shows the IRS is making progress, but much remains to be done.

TIGTA said that while the number of frauds has risen, the amount of federal revenue lost to these crimes has decreased. In 2011, the government lost $3.6 billion in potentially fraudulent tax refunds, down from $5.2 billion in 2010.

The thieves are increasingly working from abroad, TIGTA found. In 2011, someone using a single mailing address in Lithuania made more tax filings with fraudulent Social Security numbers than any single U.S. address, TIGTA said.

The Lithuanian address received $220,489 in fraudulent IRS refunds; an address in Shanghai received $156,533.

"The constantly evolving tactics used by scammers to commit identity theft continues to be one of the biggest challenges facing the IRS," the IRS said in a statement on Thursday.

TIGTA said the IRS must do more to spot red flags signaling potential fraud in tax filings, such as multiple filings from the same address, and to help victims more quickly.

The IRS said it agreed with TIGTA's recommendations.

(Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh, Bernard Orr)

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Comments (1)
MassResident wrote:
My wife and I had that problem this year. We got a notice from the IRS acknowledging a return in her name and indicating the refund would be sent to another state. We contacted the IRS of course but I really don’t understand how they can be so bad at this. They have records of every penny we earn, know where we live, and are about to demand proof of health insurance but can’t detect a return asking for a refund on money that was never paid in taxes? How is that possible?

The only thing I can think of is that the decision to forbid the IRS from working with the police so they could collect taxes from criminals has gotten out of hand. It was originally used to put bootleggers in jail for tax evasion during prohibition. With 10 million illegals in the country paying taxes with fake or stolen social security numbers, the IRS can’t go after obvious identity theft without losing money. It is therefore shipping cash to anyone who claims a refund regardless of how dubious it is. I am sure the reason we got the notice at our home address was to determine whether my wife had really divorced me and moved to a different address without actually asking the question.

Private companies also play that game. The first time someone stole my wife’s ID, he bought computers with her credit card but the company sent the goods to the credit card billing address instead of the shipping address so we got the goods instead of the thief and the store got them back in the end.

Identity theft is rampant and thanks to the NSA is about to get a lot worse. Those termites have put some holes in the internet’s security system that any crook who doesn’t have everyone’s social security and credit card numbers is too busy spending their new found riches to bother.

Nov 07, 2013 8:17pm EST  --  Report as abuse
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