Tragedy of Tax Refund Fraud


The tax refund fraud scourge is on the rise and does not show any signs of abating. Many taxpayers have already fallen victim to tax refund cheats who steal their identities and along with that, their tax refunds. The problem is exacerbated by the IRS practice of not sharing taxpayer information with enforcement authorities like the police, thus severely hampering investigative efforts to find the thieves.

It is not that the IRS are fiddling their thumbs at the problem. Mike Dobinski, a Florida - spokesman for the IRS, said 262,000 fraudulent tax returns and $1.4 billion in losses were prevented nationwide by the IRS last year. Dobinski added that so far this year, 215,000 fraudulent returns for $1.15 billion have been prevented.

However, no one can say how many tax refund fraud cases have taken place without the perpetrators being caught.

Many victims find out their identities have been stolen only when they claim for their refunds themselves. All too often, they find their claim rejected because a refund had already been “paid” to a claimant. There are also cases where the refunds may not have been paid at the time the legitimate taxpayer claims it, but the IRS does not investigate anything when they receive the second (legitimate) claim. And to make matters worse, they do pay the refund except it goes to the wrong person(s) i.e. the thieves.

To add salt to the wound, in response to investigations by the authorities or even queries by the victims themselves, the IRS will not say who filed the fraudulent claim, exactly where it went or how much claim was paid.
Various law enforcement officers are understandably annoyed at the IRS’ unwillingness to cooperate with them, among whom are Polk County Sheriff Grady Judd. Sheriff Judd said about another law enforcement colleague, “I know (Tampa Police) Chief Jane Castor has gone nuts over tax-return fraud.” Last month, Castor said in a media conference, “This is the most insanely massive violation of the law that I've seen.”

According to experts, it is very easy for your identity to be stolen simply because all it takes is to obtain your Social Security number. Then the thief would impersonate you online using your Social Security number. Unfortunately, e-filing with all its conveniences, has made identity theft and tax refund theft easier. This is because the IRS does not match Social Security numbers with names and other personal details. This makes it super easy for thieves because they can even make up a Social Security number without going to the trouble of stealing it.

Not that it is all that difficult to steal someone’s Social Security number, given the fact that yours is probably already at your bank, credit card company, doctor’s clinic or college. A favorite place tax refund thieves get Social Security numbers is nursing homes.

Tax refund fraud cases since last year totaled a staggering $130 million in Tampa alone. With so much going wrong with tax refunds, the IRS is considering a pilot program in Tampa where the agency may divulge personal tax information to the police with the permission of victims of the theft.



DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Darrin Mish, Tampa Tax Attorney, The Law Offices of Darrin Mish, P.A. | Attorney Advertising

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