Jennifer Waters for the Wall St.Journal writes: In March of 2011, David Parker filed his 2010 income-tax return with a check for what he owed the Internal Revenue Service.
Three months later, weeks after the check was cashed, the Seattle resident discovered during a mortgage refinancing that someone else had collected more than $3,600 through a fraudulent return that carried his name, Social Security number and an address in Irving, Texas, with his same street name.
"It's a shock when this happens to you," says Mr. Parker.
It took dozens of hours on numerous calls to multiple IRS caseworkers over 20 months and help from the Office of the Taxpayer Advocate, the IRS watchdog, before his case was settled. The IRS flagged his account to prevent further abuse.
But when he filed his 2011 tax return last Feb. 17, it was rejected because one had already been filed with his Social Security number.
The IRS has long been the bane of American taxpayers, but the misery index has shot up since the advent of electronic filing and a congressional mandate to get refunds out within 21 days of receipt.
That puts speed ahead of detail and accuracy at the IRS, spiking tax-related identity thefts from 48,000 in 2008 to 650,000 in 2012, according to the Taxpayer Advocate.
Why the hike? E-filing is effortless. It only requires a legitimate name, a Social Security number and information from the W-2, not the actual form.
"It's so easy to type up a phony one," says Jay Starkman, a certified public accountant in Atlanta. "There are no fingerprints, no software ID, no tax forms to sign, no trail."
The IRS doesn't require refunds to be deposited to accounts in the names of filers, so criminals have them sent to their own accounts and, increasingly, to prepaid debit cards that have nothing tied to them.
Some 80% of the more than 130 million individual tax forms filed annually are e-filed, which has popped out refunds in as little as seven days. Computers armed with sophisticated algorithms and filters are doing most of the work, but they do still pass human eyes.
That's troubling to Mr. Parker. The two-page fake return stated that Mr. Parker, chief executive of the Washington Institute of Sports Medicine, which he owns as well as two other businesses and investment properties, made only $32,000 in 2009, a level that qualifies for an additional refund of $400 from the Earned Income Tax Credit. His real filings over two decades have reported incomes far higher and were at least an inch thick and very complicated.
"I asked them if the rejected one looks like the ones I've sent for the last 25 years," says Mr. Parker, who noted that he has been married for 45 years and the fraudulent return said he was single.
"The IRS would only say that people get divorced, they move, we don't know that wasn't you and that your circumstances didn't change," Mr. Parker says. "That's a valid point, but shouldn't they have checked it out more?"
The IRS, burned by rampant criticism, calls identity and refund theft a "top priority." It has instituted stronger screening filters and doubled caseworkers to 3,000 to work on identity-theft-related issues. Another 35,000 employees are trained to identify theft indicators and help victims.
Still, accountants and ID-fraud experts warn that tax-fraud theft will get a lot worse before the IRS gets control of it.
"The only way to stop it is to slow down the refund process," Mr. Starkman says.
Here are tips on how to avoid tax fraud:
Stalk your mail carrier. If you haven't received your W-2 or other tax documents, find out why. This is prime time for mail theft.
Don't fall for phishing emails. The IRS will never contact you through email or ask you online for your Social Security number to verify your identity.
Don't carry your Social Security card around and never give the number out to any business that asks for it.
File early. "It's not going to stop any breaches, but it reduces your risk," says Raul Vargas, fraud operations manager for Identity 911, an identity-management solutions firm.
If you have a "reasonable" expectation of victimization because your information was breached or you already have been victimized, ask the IRS for an identity protection personal identification number, or IP PIN. That's attached to your Social Security number, blocking your return until someone has manually looked at it for three years.
If you haven't done it already, when you e-file this year, get a PIN for filings or use your adjusted gross income from 2011 as a PIN. If you forget or lose it, the IRS will give it to you over the phone, but plan on it taking as much as an hour of waiting.
0 comments:
Post a Comment