Jimmy Rodefer: Tax-fraud identity theft continues as growth industry

“Filing tax returns for most people doesn’t rank with going on vacation or winning the lottery. Thus, when the IRS says it received a second tax return with your information, it’s obviously not because you enjoyed the process so much you filed again. What’s happened is that you’ve become the victim of tax identity theft.”

The above was included in a column I wrote for the News Sentinel that was published in in June 2013. Since then the problem has only become worse.

NBC News, CBS News, the New York Times, and other media outlets are suddenly awash with reports of identity theft leading to tax fraud.

The NBC News story headline of Feb. 12, 2015 doesn’t offer much hope that the authorities are getting a clear and convincing handle on the problem: “Tax-refund Fraud Soaring, Little IRS Can Do.” From the story:

“And the problem—which the agency admits is growing quickly—is compounded by an outdated fraud-detection system that has trouble identifying many attempts to trick it. ‘The flaws in [the IRS'] system are so basic,’ said Akli Adjaoute, founder and CEO of artificial intelligence firm Brighterion. ‘The whole system is a disaster,’ Adjaoute said.”

Criminals, petty, first-time, and career, are attracted to the paths of thievery’s least resistance. And tax-fraud identity theft is clearly a growth industry. Not much is needed to file a phony return, just a name, address and Social Security number.

From 2011 to 2013 the IRS doubled to 3,000 the number of staff working on identity theft and tax fraud. However, tax-fraud identity theft is just another problem on a long list of expensive problems: processing more than 150 million tax returns, saying its budget size harms service and meeting the daunting demands of Obamacare.

It’s not just at the federal level. Early in February Intuit, which makes Turbo Tax, halted submission of electronic tax filings to state revenue departments for 24 hours because of apprehension that its software was being used for a spiked number of fraudulent returns.

What can you do to protect yourself from identity theft, particularly when you’re dealing with everyday identity theft potential and every news cycle seems to report on a new case of hackers breaking into some company’s or government’s system to steal millions of identities?

  • Never click on a link or an e-mail attachment claiming to be from the IRS; the IRS doesn’t send e-mails on these subjects: forward the suspicious e-mail to your tax advisor or, if you don’t have one, to the IRS
  • Shred your financial information
  • Use firewalls and intrusion protection on your home computer if it contains your personal financial information and update often your anti-virus and malware systems
  • Don’t give out your Social Security number unless it’s absolutely necessary: don’t hand it over just because someone in some office asks for it

The IRS is running a pilot anti-fraud program for taxpayers in Florida, Georgia and the District of Columbia: http://www.irs.gov/Individuals/Identity-Protection-PIN-Pilot-Program.

There are bad people out there. You have to take precautions with your tax returns for the same reason you put locks on your home’s doors and install security systems, to make it as hard as you can for them to make you a victim.

This article was originally published in the Knoxville News Sentinel on February 22, 2015. 

Tagged Featured, Fraud, Identity Theft, #JimmyTalk, Tax Fraud