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Filers beware: Scammers targeting tax returns

By Staff | Mar 3, 2012

When Cape Coral resident Dianne Woodford sat down at a computer Monday to do her 81-year-old mother’s taxes, she ran into an unwelcome surprise.

“It told me that someone had already filed under that Social Security number,” Woodford said Thursday of the online tax preparation service.

She immediately called the Internal Revenue Service and learned that a tax return had been filed using her mother’s information and it was under review.

“They told me that they already had an alert on it because something looked suspicious,” Woodford said.

She spent the remainder of the day sorting out the mess. An identity theft affidavit had to be completed for the IRS and a fraud alert was placed on her mother’s identity. Woodford also contacted the Federal Trade Commission.

No longer able to submit her mother’s tax return electronically, she would have to send it by certified mail. A copy of her mother’s identification would have to be included, along with other documents, to prove it was really her.

“I have to send in her tax return with confirmation,” Woodford said. “So you’re handling it all a little differently.”

As further instructed by the IRS, she filed a report with the Cape Coral Police Department, then froze her mother’s credit as an extra precaution.

“Of course it’s stressful,” she said of the unfortunate experience.

Woodford noted that because of her mother’s age, there is not much to worry about. However, one of her clients – a business owner – fell victim last year to identity theft and tax fraud and it still sorting out the mess.

“It really affects people because you have to be watching constantly,” Woodford said, adding that her client it still waiting on last year’s refund.

“It’s been over a year,” she said.

According to the Internal Revenue Service, more than 140 million tax returns are filed each year. Of those, more than 100 million tax refunds are issued.

“Tax fraud is nothing new,” Michael Dobzinski, a spokesman for the IRS, said.

He added that identity theft – stealing a person’s personal information then using it to submit a fraudulent tax return – is a new aspect of tax fraud.

“These are some of our more complex cases,” Dobzinski said.

The following tax year, IRS officials documented 262,000 cases – an increase of almost 435 percent. The IRS stopped $1.5 billion in refunds.

“It’s certainly a priority at the IRS because of the significant increase we’ve seen,” Dobzinski said.

The IRS is trying to take actions to improve the handling of identity theft cases as they are uncovered, as well as improve its methods of identifying fraudulent returns that are submitted before the refunds are processed.

“This year we’ve put some new filters in place to screen or identify returns that may be fraudulent,” he said.

For example, the filters are designed to flag certain year-to-year changes in a person’s tax return, like an address change or change to marital status.

The agency also has been working with law enforcement and regional task forces, including the Department of Justice. A recent sweep was conducted in Tampa and Miami – two hot spots – and several people were arrested.

Dobzinski noted that the actual crime of stealing a person’s personal information occurs outside of the tax administration process, and that people should take the proper measures to protect their information.

“Often, the Social Security numbers are stolen and used, or they are stolen and sold,” he said.

Locally, tax fraud cases tied to identity theft are not uncommon.

“Naturally, this crime spikes during tax season, but citizens need to be aware of credit fraud year-round,” Lt. Tony Sizemore, the spokesman for the Cape Coral Police Department, said.

Online tax preparation companies typically are the most vulnerable.

“But there have been instances of tax fraud being committed by employees at ‘brick and mortar’ businesses,” he said.

Sizemore offered the following tips to residents:

n Practice safe online activities.

n Do not put sensitive information freely online.

n Use only trusted online tax software.

n Ensure antivirus, antiphishing and antispyware products are up to date.

“In particular, file your taxes ASAP. You need to literally beat the crooks to the punch,” he said. “The IRS will not let would-be criminals file in your name once you have already completed your taxes.”

An unusual delay in receiving a refund can be a warning sign or red flag.

“If you have been targeted for others types of identity theft or fraud be on the lookout for tax fraud, too,” Sizemore said.

Those who believe that they are a victim of identity theft or tax fraud should immediately contact the Cape Coral Police Department at (239) 574-3223.

“If you’ve been a victim of identity theft and have gotten an IRS notice, stay in contact with the person on the notice,” Dobzinski said.

Those who think that they are a victim but have not received a notice can alert the IRS’ Identity Protection Specialized Unit at (800) 908-4490.

Victims must complete an identity theft affidavit for the IRS.

“We have to go through the process of securing the necessary information to make sure we are dealing with the correct person that’s entitled to the refund,” he said. “Once we straighten that out, they’ll get their refund.”

Each case stands on its own as to how long this can take. In comparison, the average turnaround time for a tax return with no issues is 10 to 21 days.

“It’s going to take longer than that,” Dobzinski said.

For more information, visit the Internal Revenue Service at: www.irs.gov.