Victims of Tax Refund Theft Turn to Lawmakers for Help
May 10, 2012 (The Palm Beach Post, Fla.) For identity thieves, the Internal Revenue Service is like an ATM. They file a fraudulent income tax return using someone else's Social Security number and quickly receive a "refund."
But for the victims of the scheme, the wait to get the money that is rightfully theirs can be as long as 18 months.
A growing number of South Floridians who are victims of tax-related identity theft are turning to their U.S. senators and congressmen for help, and their refunds are being expedited.
"When we get involved, it generally takes 30 to 45 days to get refunds," said Bryan Gulley, spokesman for Sen. Bill Nelson, D-Fla. "One of the reasons our office exists is to help people who are having problems."
Sometimes the victims have been dealing with the IRS for months.
In 2011, Nelson's office was contacted by 70 victims of identify-theft-related tax fraud, but this year there have been 224 so far.
Here's how the scam works: The criminals use false financial information on the fraudulent return. A taxpayer files a return, and the Internal Revenue Service informs him or her that someone else has already filed using their Social Security number. But while the fraudsters receive the money that isn't theirs fairly quickly, the legitimate taxpayer is put on hold for months and first has to prove he is who he is. That means filling out an IRS identify theft affidavit, filing a report with local law enforcement and notifying the Federal Trade Commission.
The problem is massive, with $5 billion a year going out in fraudulent refunds. The Internal Revenue Service doesn't know for sure how many identity thieves are filing fake returns each year, said J. Russell George, head of the Treasury Inspector General for Tax Administration, at a congressional hearing this week, The Washington Post reported.
The IRS said in a statement that it is implementing new processes for handling returns and new filters to detect fraud. It also said it is working to speed up resolution of victims' cases.
The IRS handled 1.34 million returns involving identity theft in 2011, according to figures the agency provided Nelson's office. Through March, the IRS has identified more than 720,000 identity theft returns and blocked more than 290,000 fraudulent returns.
Sen. Marco Rubio's office also is reporting an increase in tax fraud victims seeking assistance, but didn't provide exact numbers.
"It is in the dozens both last year and this year. Last year about 16 percent of the cases involved ID theft. So far this year it's 26 percent," said Alex Conant, spokesman for Rubio, R-Fla.
"We contact the IRS and can set them up with a taxpayer advocate who will work with them to get their refund," Conant said.
Michael Mahaffey, spokesman for Rep. Tom Rooney, R-Tequesta, said the office also has had an increase in constituents asking for help obtaining their refunds.
"We are working with the sheriff's office and IRS taxpayer advocates to get those refunds sped along. You have people who are struggling to pay their mortgage, to keep a roof over their head and pay their bills. They were counting on the money, and it's not there," Mahaffey said.
Legislators hope that a pilot program just launched in Florida aimed at improving cooperation between the agency and local law enforcement will help combat the problem.
Under the program, police can have victims fill out an IRS disclosure form that will allow the IRS to share returns filed under the victim's name with local and state law enforcement.
Previously, the IRS has said it could not provide such information because of privacy laws.
Nelson's finance subcommittee on fiscal responsibility and economic growth has held two investigative hearings on the issue, and he has introduced legislation that would strengthen penalties for identity thieves and expand protections for victims, such as a PIN system to safeguard identities.
Another problem is the Social Security Administration's publication of a list of deceased people's Social Security numbers known as the death master file index. Criminals are accessing it, and often those fraudulent filings aren't detected, Nelson's spokesman Gulley said.
"We have been trying to keep the Social Security Administration from publishing that for at least two years. Tax returns have been filed in the names of deceased people. There was a couple whose child passed away at the age of 6 months. The thief filed a tax return in the child's name," Gulley said.
The advent of electronic filing has made the crime a lot easier.
The routing numbers on debit cards many of the thieves anonymously acquire cannot be distinguished from a bank account number, Gulley said.