Identity Theft Leads to Increased Tax Fraud in U.S. (Especially Florida)
The IRS receives 100 million tax returns per year, and so far this year, 2.6 million cases of fraudulent returns have occurred
Tax fraud is on the rise, especially in the state of Florida where cyber criminals are posing as other people and taking advantage of their tax refunds.
According to a new report by The New York Times, cyber criminals are costing the U.S. Internal Revenue Service (IRS) hundreds of millions to billions of dollars in fraudulent refunds. Hackers simply get their hands on private information like names, birth dates and social security numbers to do so.
With this kind of information, cyber criminals are filing electronic tax returns. They pose as a legitimate person who hasn’t filed their taxes yet, and receive refunds in the way of government-approved debit cards or checks. These cards or checks are often mailed to abandoned homes, which the criminals list as their addresses, and money is wrongfully collected from the IRS.
By the time the legitimate person goes to file their tax returns, the IRS must launch an investigation into the second claim, which can take as long as a year. Most times, the IRS ends up having to pay both claims, since the first fraudulent filing is hard to trace.
Tax fraud cases are becoming more and more frequent. The IRS receives 100 million tax returns per year, and so far this year, 2.6 million cases of fraudulent returns have occurred. Most of them are identity theft-related, and only 30 percent of the filings have been reviewed for this year, meaning this 2.6 million could dramatically increase by the time all tax filings are reviewed.
Earlier this month, J. Russell George, U.S. Treasury inspector general for tax administration, told Congress that there were 940,000 known fraudulent returns in 2010, which amounted to $6.5 billion. He also noted that there were an additional 1.5 million returns that could have possibly been fraudulent that same year, which amounts to about $5.2 billion.
So far, the IRS has deployed improved technology for detecting fraudulent claims, distributed personal identification numbers for victims, and hired more investigators and employees to look into claims.
These efforts appear to be making some sort of difference, considering the fact that the number of fraudulent claims that were stopped from 2008 to 2011 increased dramatically. In 2011, the IRS stopped 1.3 million fake claims.
While this happens all over the U.S., the problem is particularly apparent in the state of Florida. According to NYT, this is because Florida’s population consists mainly of senior citizens, and the state has many health care facilities that criminals easily steal information from.
“The IRS is doing what they can to prevent this, but this is like a tsunami of fraud,” said Wifredo A. Ferrer, the United States attorney for the Southern District of Florida. “Everywhere I go, every dinner, every function I attend, someone will come up to me and tell me they are a victim — people in this office, police officers, firefighters.”