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$15.5 million Lost To Fraudulent IRS Impersonators In Nationwide ScamTaxes and Investment

Garza & HarrisMarch 2015

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Tax officials and lawmakers have estimated that more than 366,000 Americans nation-wide have been targeted by identity theft tax fraud this tax season. Congressional hearings were recently held to find solutions to the in-creasing tax fraud and tax scams that have gripped the nation.

Valid Identities and False Tax Returns

Fraud investigators report that the unidentified scam artists steal refunds and fool taxpayers by posing as members of the Internal Revenue Service. The IRS impersonators then demand payments, claiming that individuals owe the government taxes, and use hard-to-track prepaid debit cards or wire transfers to complete transactions. Tax officials report that it is likely that these individuals have access to information from tax returns from previous years and may know the last four digits of taxpayers Social Security numbers.

At a Senate Finance Committee hearing in February, Mike Alley, Indiana’s Revenue Commissioner, said “though early in the 2015 filing season, we are already seeing a dramatic increase in the use of valid identities which have been stolen.” Suspicious tax filings include phony tax returns that mimic legitimate taxpayers information including address, name and income.

“Preying on Honest Tax Payers”

“These criminal acts are perpetrated by thieves hiding behind telephone lines and computers, preying on honest taxpayers and robbing the Treasury of tens of billions of dollars every year,” Sen. Orrin Hatch, Chairman of the Senate Finance Committee, said in his opening statement. “This must stop.”

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State authorities report that an estimated $5.8 billion was stolen from the Federal Government in 2013 as a result of refund scams. The Department of Justice and the Treasury Inspector General for Tax Administration have been discussing ways in which they can track and stop these crimes from happen-ing. Tax officials and online private tax preparation companies, such as Tur-boTax, are encouraged to increase the standards of their services while also providing faster income verification to the IRS.

Currently there is a gap between the time when taxpayers file for returns and when the IRS receives information from employers. Filing season begins in late January for taxpayers, while companies have until March 31 to report income information. By the time information is reported and verified by the IRS, refunds have already been made to fraudulent tax filers.

The Obama administration has requested legislation to increase monitoring of refunds to prepaid debit cards, especially through third party tax prepar-ers, and to mobilize transactions between the IRS, employers and state tax authorities.