Tax refund thieves obtain Social Security numbers from places like death records from hospitals, then insert a name and false income details. According to Tampa police, detailed instructions are passed around among street criminals. It is called "cocaine on a card," as the refunds come on a debit card.
Strangely, it is easy to get away with identity theft and tax return fraud because the IRS does not verify income records through third party channels like employers or financial institutions. Usually by the time the police are alerted to the scam, the culprits are long gone. The Tampa Police Department has been trying to combat the crime, arresting 49 for tax fraud last year and identifying $130 million in fraudulent refunds. But the problem the police face is proving identity theft.
At least half a million people have been the victims of tax fraud since 2008. Even the late Tampa Police Officer David Curtis, who was killed on the job in 2009, had his identity stolen after he died. Although Curtis’ widow contacted the IRS, it took years to finally receive the refund she was owed. Clearly, it is futile to hope on the police alone to succeed in eradicating this crime. The IRS has a pivotal role to play in this.
The IRS has to do the basic thing – verify income claims with third party sources. Granted, this may slow the process for filers, but it would hamstring identity thieves who do not have access to W-2 forms and other income information.
Right now, the IRS is in the process of coding the accounts of deceased taxpayers to ensure no refunds are issued in their names. Personal identification numbers have provided 250,000 victims of identity theft with a way to verify that their returns are valid. This PIN system should be expanded to cover all e-tax filers.
Florida Senator Bill Nelson, who chairs the Senate subcommittee on this issue, recently sponsored the Identity Theft and Tax Fraud Prevention Act. Senator Nelson also announced that the IRS will test a new program in Florida to make it easier for local law enforcement to prosecute income tax fraud.