Accusations of tax fraud are serious and can have long lasting personal and professional consequences. When the IRS accuses a taxpayer of tax fraud or tax evasion, substantial fines and criminal penalties may be looming. A growing number of Orange County taxpayers may have tax fraud charges filed against them due to no fault of their own, but due to the work of identity thieves.
The IRS says that almost 250,000 incidents of identity theft-related tax fraud occurred in 2010. These numbers are up from just over 50,000 incidents in 2008, according to data from the U.S. Government Accountability Office. Complex feelings of vulnerability and financial insecurity often occur when a person steals your Social Security number to file a false tax return. Such theft not only destabilizes one's finances, but also commonly leads to lengthy delays in the processing of a legitimate return.
Identity thieves may use stolen Social Security numbers to file a fraudulent return or to obtain employment, leading the IRS to believe that the identity theft victim has unreported income. There are also many ways that identity thieves can access Social Security numbers to steal the identities of living taxpayers and even deceased individuals.
Nina E. Olson, the United States Taxpayer Advocate, says that many websites provide Social Security numbers free of charge and that anyone can obtain Social Security numbers and other financial information through a simple web search. Many identity thieves prefer using the Social Security numbers of young children, deceased individuals and the elderly who typically do not file tax returns, thereby making the tax fraud harder to uncover.
One attorney found that his deceased wife's Social Security number was used to file a fraudulent return and was outraged that her ID was publically available on the internet.
"Literally, you can look up anybody's information in 15 seconds," he said. "And it should not be that easy. It's really outrageous."
To combat such identity theft the IRS has implemented new e-filing filters that have stopped at least $900 million in refunds from going to identity thieves. Beth Tucker, IRS deputy commissioner, said that the IRS is also working on new ways to stop increasingly cunning identity thieves.
"Identity theft cases are becoming increasingly complex, involving a dedicated review process to ensure we resolve the case satisfactorily for the victim," she said.
Source: Detroit Free Press, "Fake returns seek real tax refunds," Susan Tompor, 6/9/11