ID Theft and Tax Refund Fraud-A Growing IRS Problem

A recent government report shows just how big and nearly out of control ID theft and tax refund fraud issues are for the IRS. A recent Reuters article titled: “Tax Refund ID Theft is Growing ‘epidemic’: U.S. IRS watchdogcites a the Treasury Inspector General for Tax Administration (TIGTA) report illuminating the increase in stolen names and Social Security numbers that scammers use to file phony electronic tax forms for IRS refunds.

The Reuters article focuses on the following important information from the TIGTA reports:

  • More Americans’ identities were stolen in tax refund crimes in the first six months of 2013 than in all of 2012
  • About 1.6 million Americans were victims of ID theft/tax refund crimes in 2013 through June, up from 1.2 million taxpayers in all of 2012.
  • While the number of frauds has risen, the report shows the total federal revenue lost to these crimes has decreased. In 2011, the government lost $3.6 billion in potentially fraudulent tax refunds, down from $5.2 billion in 2010.
  • ID thieves are increasingly working from abroad. In 2011, someone using a single mailing address in Lithuania made more tax filings with fraudulent Social Security numbers than any single U.S. address. The report provides two examples: A Lithuanian address received $220,489 in fraudulent IRS refunds; an address in Shanghai received $156,533.

According to the Reuters article, the IRS acknowledges the tax refund fraud explosion in recent years. The agency has agreed with TIGTA’s recommendations and admits it needs to get better at the following:

  • Spotting red flags signaling potential fraud in tax filings, such as multiple filings from the same address.
  • Help victims more quickly.

However, the agency maintains that the constantly evolving tactics used by scammers to commit identity theft continues to be one of the biggest challenges they face.

If you owe more than $10,000 in back taxes, have received an audit letter or are under audit, you need to hire a certified tax resolution specialist who is accustomed to dealing with the IRS. This tax pro can properly organize your records and help negotiate an IRS payment plan so your IRS problems become a thing of the past.

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