An article in the New York Times reveals that criminals have found ways to change places online with law-abiding Americans. They are fooling government agencies, including the IRS, regarding payments owed to citizens.
These thefts begin with stolen Social Security numbers. Then they get birth dates. With this information, which seems minimal, the thieves are filing refund requests.
How much money is involved? Over $6 billion in 2010. Compared to the total of money collected, this is chump change. But it’s indicative of the ability of criminals to fool the IRS’s computer system. It could be more money than this, however. The IRS may not be reporting the full details.
They file early, before citizens file.
The money sometimes goes to pre-paid debit cards. These are easily available. They are difficult to trace. They are available from tax-preparation services. In other cases, postal workers have been robbed to get trucks full of them.
In some cases, the IRS must pay the refunds twice.
The Inspector General fr tax administration of the IRS testified before Congress that the IRS in 2010 detected a total of 945,000 counterfeit returns in 2010. Payouts: $6.5 billion. The agency may have missed an additional 1.5 million returns.
In other words, the agency does not know how many returns were fraudulent.
Florida is #1 for these fraudulent returns.
The Times reports the following:
The United States attorney for the Southern District of Florida, Wifredo A. Ferrer, called identity-theft tax fraud an “epidemic.” He formed a task force of 18 federal and state agencies, including the I.R.S., to combat the problem. Despite those efforts, it is worsening, Mr. Ferrer said.
“The I.R.S. is doing what they can to prevent this, but this is like a tsunami of fraud,” Mr. Ferrer said. “Everywhere I go, every dinner, every function I attend, someone will come up to me and tell me they are a victim — people in this office, police officers, firefighters.”
It has been growing fast over the past two years. With 100 million tax filings a year, fraud is relatively easy.
The is a bill before the Senate to increase the penalties for tax fraud identity theft. Supporters claim the present penalties are too low.
The question arises: If stolen identities are this easy to exploit, how widespread is it?
I have identity theft insurance through my homeowner’s policy.