Re­port: IRS re­funded $4B to iden­tity thieves

The Washington Times Daily - - Politics - BY STEPHEN OHLEMACHER

The In­ter­nal Rev­enue Ser­vice is­sued $4 bil­lion in fraud­u­lent tax re­funds last year to peo­ple us­ing stolen iden­ti­ties, with some of the money go­ing to ad­dresses in Bul­garia, Lithua­nia and Ire­land, ac­cord­ing to an in­spec­tor gen­eral’s re­port re­leased Thurs­day.

The IRS sent a to­tal of 655 tax re­funds to a sin­gle ad­dress in Lithua­nia, and 343 re­funds went to a lone ad­dress in Shang­hai.

In the U.S., more fraud­u­lent re­turns went to Mi­ami than any other city. Other top des­ti­na­tions were Chicago, Detroit, At­lanta and Houston.

The IRS has stepped up ef­forts to fight iden­tity theft, but thieves are get­ting more ag­gres­sive, said the re­port by J. Rus­sell Ge­orge, Trea­sury’s in­spec­tor gen­eral for tax ad­min­is­tra­tion. Last year, the IRS stopped more than $12 bil­lion in fraud­u­lent re­funds from go­ing to iden­tity thieves, com­pared with $8 bil­lion the year be­fore.

“Iden­tity theft con­tin­ues to be a se­ri­ous prob­lem with dev­as­tat­ing con­se­quences for tax­pay­ers and an enor­mous im­pact on tax ad­min­is­tra­tion,” Mr. Ge­orge said in a state­ment. The fraud “erodes tax­payer con­fi­dence in the fed­eral tax sys­tem.”

Thieves of­ten steal So­cial Se­cu­rity num­bers from peo­ple who don’t have to file tax re­turns, in­clud­ing the young, the old and peo­ple who have died, the re­port said. In other cases, thieves use stolen So­cial Se­cu­rity num­bers to file fraud­u­lent tax re­turns be­fore the le­git­i­mate tax­payer files.

The IRS, which takes pride in is­su­ing quick re­funds, of­ten sends them out be­fore em­ploy­ers are re­quired to file forms doc­u­ment­ing wages, the re­port said.

“The con­stantly evolv­ing tac­tics used by scam­mers to com­mit iden­tity theft con­tin­ues to be one of the big­gest chal­lenges fac­ing the IRS, and we take this is­sue very se­ri­ously,” the IRS said in a state­ment. “The IRS has a com­pre­hen­sive and ag­gres­sive iden­tity theft strat­egy that fo­cuses on pre­vent­ing re­fund fraud, in­ves­ti­gat­ing th­ese crimes and as­sist­ing tax­pay­ers vic­tim­ized by it.”

De­spite bud­get cuts, the agency said, agents have re­solved more than 565,000 cases of iden­tity theft this year, three times the num­ber of cases re­solved at the same time last year.

A sep­a­rate re­port by Mr. Ge­orge said the num­ber of iden­tity theft vic­tims is on the rise as thieves get more ag­gres­sive.

Through June, the IRS iden­ti­fied 1.6 mil­lion vic­tims who had their iden­ti­ties stolen dur­ing this year’s tax fil­ing sea­son, the re­port said. That com­pares with 1.2 mil­lion vic­tims in 2012.

Many of th­ese peo­ple didn’t re­al­ize they were vic­tims un­til they sub­mit­ted their re­turns only to learn from the IRS that some­one else had al­ready used their So­cial Se­cu­rity num­ber to file and claim a re­fund.

The IRS does a good job of even­tu­ally iden­ti­fy­ing the proper owner of So­cial Se­cu­rity num­bers, but the process can be lengthy, the re­port said. For cases closed be­tween Au­gust 2011 and July 2012, it took an av­er­age of 312 days to re­solve the case and is­sue a proper re­fund, the re­port said.

The IRS said it has re­solved most of this year’s iden­tity theft cases within 120 days.

Last year, the IRS is­sued 1.1 mil­lion re­funds to peo­ple us­ing stolen So­cial Se­cu­rity num­bers, the in­spec­tor gen­eral’s re­port said. Those re­funds to­taled $3.6 bil­lion. By com­par­i­son, the IRS is­sued $5.2 bil­lion in re­funds to peo­ple who stole So­cial Se­cu­rity num­bers in 2011, the re­port said.

Ad­di­tion­ally, the IRS is­sued 141,000 re­funds last year to peo­ple us­ing stolen tax­payer iden­ti­fi­ca­tion num­bers, which are typ­i­cally used by for­eign cit­i­zens who earn money in the U.S. Those re­funds to­taled $385 mil­lion, the re­port said.

Florida is a big tar­get of iden­tity theft in part be­cause of the large num­ber of older res­i­dents liv­ing there. Older and younger peo­ple can be tar­gets for iden­tity theft be­cause many don’t meet the in­come re­quire­ments to file a fed­eral tax re­turn.

Nearly 38,000 po­ten­tially fraud­u­lent re­funds, to­tal­ing $147 mil­lion, were sent to ad­dresses in Mi­ami, the re­port said.


“Iden­tity theft con­tin­ues to be a se­ri­ous prob­lem with dev­as­tat­ing con­se­quences for tax­pay­ers and an enor­mous im­pact on tax ad­min­is­tra­tion,” said J. Rus­sell Ge­orge, Trea­sury’s in­spec­tor gen­eral for tax ad­min­is­tra­tion.

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