Tag: Tax Identity Theft

Tax Identity Theft often involves claiming a tax refund that rightfully belongs to someone else by assuming that person’s identity. It is a form of identity theft.  As a tax attorney, it’s something I see happen more than I like.

Very often, Tax Identity Theft arises from stealing Social Security numbers. Although the IRS constantly warns taxpayers not to carry their Social Security cards with them and not to give personal information over the phone, through the mail or on the Internet unless they have initiated the contact or are sure who they are dealing with, identity theft is still rampant.

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Tax Evasion
IRS Statute of Limitations

Those who commit Tax Identity Theft submit large numbers of fake tax returns electronically in the hopes that some of them will get through the IRS’ security screens. So rather than steal identities wallet by wallet, or computer by computer, they glean names and Social Security numbers by the hundreds or thousands, often with the help of corrupt insiders with access to personal data, including tax preparers, health care billing clerks, state employees and debt collectors.

According to Nina Olson, the National Taxpayer Advocate, “(Social Security theft fraud is) relatively inexpensive. You can get somebody to steal some names…and you can ping our system, and if it doesn’t go through, big deal.”

The Government Accountability Office states that the IRS detected 642,000 cases of identity theft in the first nine months of 2012 which was an increase from 242,000 for the whole of 2011. And that 2012 number does not include 436,000 fraudulent refund claims filed in 2012 using the Social Security numbers of Puerto Rican citizens, who don’t have to file with the IRS or pay federal taxes unless they have income from the states.

One main contributing factor to the scourge of identity theft is the fact that the IRS does not process the W-2s and 1099s it gets for taxpayers until after it pays out refunds. Therefore, if an identity thief has a valid name and Social Security number, he or she can create bogus W-2s and apply for a refund of any amount of withholding, or for a refundable credit, such as the earned income tax credit, worth thousands of dollars.

Another main source of personal particulars for identity thieves is the Social Security Death Index—a government maintained database – which is freely available on genealogy research sites and includes the full name, Social Security number, date of birth and death and the last address on record. This is the reason the IRS had inadvertently refunded money to dead people in the past. But nowadays, the IRS obtains more regular updates from the Social Security Administration which allows it to block refund requests under names of deceased persons. The Social Security Administration themselves have also begun to limit the information it puts out in the Social Security Death Index.

But the identity thieves also use names of the living, in particular, taxpayers who are not taxable such as the disabled, welfare recipients, even prisoners.

The best way to avoid becoming a victim of Tax Identity Theft is to file your tax returns early. If you beat the crook to it, he or she cannot use your social security number anymore.

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