IRS is overwhelmed by tax return identity theft

Astronomical as it sounds, these statistics do not include the almost 480,000 fraudulent refund claims filed using the Social Security numbers of Puerto Rican citizens, who generally do not file federal tax returns unless earning stateside income, or the almost 1.5 million bogus tax returns claiming over $5 billion in refunds, according to the IRS.

While the exact numbers of fraudulent tax returns reported vary from source to source, identity thieves are exploiting a system in which the IRS does not process the W-2s and 1099s it receives for taxpayers until long after a refund is issued. Fraudsters in possession of a valid name and Social Security number frequently create phony W-2s and related forms in search of a quick refund.

Taxpayers are urged to file early as a bogus claim will not be processed if a real tax return has already been filed for the year. If the fraudster files first, the refund process can exceed 180 days while being investigated.

“When a taxpayer who is owed a refund becomes a victim of identity theft and the thief files a return first, the victim can still get their money by going through an agency process,” IRS spokeswoman Jennifer Jenkins told KSL. “This process involves the completion of several affidavits and an investigation by our agency.”

According to the IRS, identity theft and false tax return refund fraud is a “top priority,” as the agency has assigned more than 3,000 employees to investigate these cases and trained an additional 35,000 in the basics of ID Theft. While over $5 billion in fraudulent tax returns made its way through the system in 2013, the agency reports that from 2011 through November 2013, it caught more than 14.6 million suspicious tax returns involving more than $50 billion in fraudulent refunds.

This should be of particular concern for Utahns as identity theft complaints have, according to the Federal Trade Commission, almost tripled in the Beehive state since 2010.

Last month, the Senate Judiciary Committee passed a companion version of legislation written by U.S. Representative Debbie Wasserman Schultz (D-Fla.) that would make tax return identity theft a greater priority for the federal government and strengthen criminal penalties against identity thieves.

The “Stopping Tax Offenders and Prosecuting Identity Theft Act” would also expand the definition of an identity theft victim to include not only individuals, but also businesses and organizations that have had their identities stolen for phishing schemes in an attempt to obtain sensitive personal information from consumers.

“Every year, millions of hard-working Americans file tax returns in the hope of paying bills, creating savings or even taking a vacation, sadly discover that one has already been filed and a refund claimed,” Congressman Debbie Wasserman Schultz told KSL. “This legislation is imperative to better protect tax filers and penalize criminals for their actions.”

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