The IRS has taken many hits over the years (we’ll reserve judgment on what’s deserved and what’s not), but for once the tax agency is earning praise. The Associated Press reports that the White House has included in its proposed 2014 budget several items to assist the IRS in its fight against identity theft and tax fraud. Foremost among them, the IRS would be able to slap criminals who file fraudulent returns with a $5,000 civil penalty per incidence and “[increase] criminal sentences for those convicted of tax-related identity theft.”
This can only be good news. According to the Taxpayer Advocate Service (TAS)—a division that is within the IRS but independent of the agency—it’s about time for an IRS smackdown. According to the TAS, tax-related identity theft shot up 78 percent in 2012 and 650 percent since 2008, and the IRS has nearly 650,000 unresolved cases in its pipeline. Any new weapon in the government’s arsenal is going to help, and these measures tell criminals that the fight is about to get serious. (For the other tax-fraud nerds out there: The TAS’s Twitter feed is a great source of information—and a healthy dose of IRS hand-slapping, which is always good for a midday pick-me-up.)
Tax identity theft is a growing problem nationwide and the Internal Revenue Service has stepped up its efforts to crack down on this pervasive and growing type of fraud.
There are a large number of tax scams that affect consumers every year, with identity theft topping the list once again, but phishing and fraud committed by preparers are also something to keep an eye out for, according to the IRS’s annual Dirty Dozen tax scams release. Last year alone, the agency’s systems for detecting fraudulent filings saved taxpayers some $20 billion, up from $14 billion the year before. Currently, the IRS has some 3,000 of its employees working on cases related to identity theft, more than double the number committed to the task just less than two years ago. Moreover, it also has trained more than 35,000 of its employees to help consumers deal with identity theft concerns.
In the past several years, the number of incidents of identity theft related to consumers’ tax returns has surged, and there seems to be little the Internal Revenue Service can do about it. Now, some experts say that a major reason for this increase in fraud could be the result of the agency’s e-filing option.
The ability to submit one’s taxes online is a major convenience for both Americans across the country who may fret every filing season, as well as the IRS itself, which can handle the hundreds of millions of submissions it receives every year more expediently, according to a report from the Wall Street Journal. But all that ease of use can also pose a major problem for taxpayers because it opens the door for identity thieves to more quickly get in and out of the system when they try to commit fraud.
Tax day is months away, but take steps now so you can file your return early—before identity thieves beat you to the punch.
Many victims of tax-related identity theft uncover the fraud after they have filed their returns, leading to delayed refunds and additional problems with the IRS and Social Security Administration.
“One way to stay ahead of the bad guys is to file your taxes early, in January or February,” said Vicki Volkert, an IDentity Theft 911 fraud investigator, who has helped many customers resolve their tax fraud woes.
Here are some additional FAQs about tax-related identity theft from our experts:
Tax season used to be simple for David Parker. His accountant electronically filed taxes for his businesses and investments, and the refund arrived promptly in the mail.
But in the past few years, fraudsters have hit Parker again and again, despite IRS efforts to resolve the problem.
Parker is among a growing number of taxpayers who are becoming repeat victims of tax-related identity theft. “It’s a pattern we’re seeing on the rise,” said Brett Montgomery, a team leader in IDentity Theft 911’s Fraud Resolution Center. “The IRS investigation process takes so long to run its course that victims are getting hit year after year. It’s a vicious cycle.”
Identity thieves who have fallen on hard times, take heart. The IRS is here to help.
If you’re counting on that big tax refund to cover the bills and upgrade your gear to steal debit card numbers and hack into computer systems, this is your year.
The IRS may have delivered more than $5 billion in refund checks to you and your compadres who took the initiative to file fraudulent tax returns in 2011, according to Treasury Department investigators.
Keep your nose to the grindstone, and you’ll see a windfall in the next five years, when an estimated $21 billion could head your way, according to The Associated Press.
Tax-related identity theft is on the rise.
The Internal Revenue Service has flagged 2 million tax returns to review for possible fraud, according to Bloomberg.
That’s close to the total number of returns that were identified for review in 2011—and there’s still one month left in tax-filing season.
To learn more about top tax scams that can lead to tax-related identity theft, read our slideshow. And protect yourself with our easy tips.
Taxpayers have another reason to be frustrated with the Internal Revenue Service: Late refunds due to widespread identity theft.
The delayed refunds are a result of the IRS’s work to fight identity-theft-related tax fraud, according to the The Wall Street Journal. Though that means the agency’s efforts are paying off, the downside is a delay for many people of low- to moderate-income who anticipate the funds to pay bills.
The bad guys have a new favorite way to steal your identity.
Used to be crooks snagged a Social Security number to open a credit card and run up charges. Now they’ve found an easier way to make money, according to the 2012 Consumer Sentinel Data Book, the Federal Trade Commission’s annual report on consumer complaints.
Tax scams abound during tax filing season. Taxpayers can steer clear of trouble by watching for these telltale signs that identity thieves have targeted them.