Fraud­u­lent re­turns scored crooks $5.8 bil­lion in 2013

The Denver Post - - BUSINESS - By Kevin McCor­mally |

About 1 mil­lion fil­ers dis­cover that some­one else has claimed their re­funds ev­ery year, so don’t let that hap­pen to you.

H ere’s an­other res­o­lu­tion for the new year: File your tax re­turn as soon as pos­si­ble.

We’re not sim­ply an­tipro­cras­ti­na­tion. We want you to get your money, and one of the surest ways to make sure you get your re­fund be­fore an iden­tity thief does is to file as soon as you can.

Once again this year, about 110 mil­lion tax­pay­ers will re­quest re­funds from the IRS, but, if his­tory is any guide, about 1 mil­lion fil­ers might dis­cover that some­one else has al­ready claimed their money with a phony tax re­turn. That’s how many fraud­u­lent re­turns in 2013 scored $5.8 bil­lion in ill-got­ten gains for the crooks who filed them. The hon­est tax­pay­ers who came to the party late had to fight to prove the money was re­ally theirs. Ac­cord­ing to the Trea­sury Depart­ment’s In­spec­tor Gen­eral for Tax Ad­min­is­tra­tion, it took an av­er­age of 278 days — more than nine months — for those cases to be re­solved so the right­ful own­ers got what they were due.

The IRS claims it stopped an­other 4.1 mil­lion phony re­turns in 2013, pre­vent­ing al­most $25 bil­lion more in tax-re­fund fraud. (No one has any idea how much fraud went un­de­tected.) But just be­fore this past Christ­mas, it was dis­closed that the tax agency ac­ci­den­tally paid nearly $50 mil­lion in re­funds in 2013 on re­turns that had been flagged as po­ten­tially fraud­u­lent. The com­puter pro­gram that was sup­posed to put the brakes on the re­funds in­stead sent them mer­rily on their way to crooks’ bank ac­counts and debit cards.

The IRS says it’s got­ten bet­ter at iden­ti­fy­ing phony re­turns, but it’s clear that a se­ri­ous flaw re­mains in the sys­tem: The tax agency pays the vast ma­jor­ity of re­funds long be­fore it has a chance to check the in­for­ma­tion on the re­turn against the W-2 in­come and with­hold­ing in­for­ma­tion pro­vided by em­ploy­ers.

While the law says em­ploy­ees must get their W-2s by Jan­uary 31, in most cases the in­for­ma­tion doesn’t get to the So­cial Se­cu­rity Ad­min­is­tra­tion un­til March 31 — and only af­ter that is it passed on to the IRS. In the mean­time, a fraud­ster with your name and match­ing So­cial Se­cu­rity num­ber can make up wage and with­hold­ing data to claim a re­fund.

What does this mean to you?

You might want to root for the IRS to do a bet­ter job stop­ping the bad guys (and Congress has helped by order­ing that, start­ing next year, em­ploy­ers must give W-2 data to the IRS a lit­tle ear­lier).

But on a more per­sonal level, make a com­mit­ment to file your 2015 re­turn as soon as you can. The IRS says it will be­gin ac­cept­ing elec­tronic re­turns on Jan­uary 19 and start pro­cess­ing pa­per forms the same day.

Once you get your W-2, 1099s and any other in­for­ma­tion needed to com­plete your re­turn, fire up the soft­ware or grab your pen to do it your­self, or sched­ule time with your ac­coun­tant, en­rolled agent or other pre­parer.

The sooner you file, the sooner you’ll get your money back — and the less likely a crook will beat you to it.


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