Identity Thieves Want to Steal Your Tax Refund
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The Fiscal Times
February 28, 2012

Nearly 100 residents of the northeast Georgia community of Elberton got a rude surprise recently when they filed for their federal tax returns:  Crooks who had stolen their Social Security numbers and other identification had already beaten them to the money.

Many of the victims gave up their full names, Social Security numbers and other identification to strangers who contacted them with a story that they could qualify for government stimulus funds if they provided key pieces of identification. “When the actual victim tries to get his income tax filled out, the IRS is saying they can’t because their Social Security number has been already used,” Elbert County Sheriff Barry Haston told a local television station.

These rural Georgia residents have plenty of company in their financial misery: a nationwide epidemic of identity theft has led to the quintupling of the number of cases of taxpayers being victimized by tax-return thieves over the past two years.

The Internal Revenue Service says that in 2010 it uncovered 48,966 cases of “bad” income tax returns involving $247 million of fraudulent returns that they removed from processing.  Last year, the number of cases jumped to 261,982 and involved $1.4 billion of returns. 

Since 2008, the IRS has identified more than 404,000 taxpayers who have been impacted by identity theft.  Yet the agency has left big holes in their electronic filing system that allows thieves to enter undetected.

There’s no way of knowing precisely the scope and cost of this alarming tax return scandal. The IRS and the Justice Department’s Tax Division last month launched investigations in 23 states targeting 105 suspects, with the biggest concentration of cases in the South, South West and California. IRS officials say they are aggressively cracking down on these tax return scams, although some of their technology and procedures for ferreting out cheats are behind the times and pale by comparison with credit card companies or even Amazon and i-Tunes in securing accounts.

“It is a sizable issue, and it’s definitely something that’s a high priority here,”  Julianne Fisher Breitbeil, a spokesperson for the IRS, told The Fiscal Times on Monday. “It’s something we have done a lot of work  to address. We have taken a lot of steps in the past year – including [employing] new filters, partnering with law enforcement around the country, offering taxpayer education, and increasing  training for our folks here.”

The IRS has come under pressure from Congress and others to crack down on identity theft,  which prompted  IRS Commissioner  Doug Shulman to recently vow to wage “an unprecedented” enforcement effort that will send tax return cheats to prison. But the additional enforcement measures and new filtering systems for detecting wrongdoers have  also slowed down tax refunds for those who have filed early. IRS officials say there is a “delicate balance” between aggressive enforcement and getting tax returns to  Americans entitled to them in a timely fashion.

Washington Editor and D.C. Bureau Chief Eric Pianin is a veteran journalist who has covered the federal government, congressional budget and tax issues, and national politics. He spent over 25 years at The Washington Post.