In the wake of recent national news that the federal government has detained 105 individuals in 23 states as part of a nationwide crackdown on identity theft and tax refund fraud, I have seen one of my own victimized by tax refund fraud. As the President of Contego Services Group, a fraud investigation company, my accountant, Tamay Reid, fell prey to the fraudster. Tamay attempted to file her taxes early this year on January 22nd through an e-file program. Once Reid had filled out all necessary information and submitted to the IRS, she received a rejection notice that her taxes had already been filed and that she would need to contact her local IRS for more information. Upon a phone call to the IRS office, she was told she would need to come in and file paperwork.
The first day Reid arrived at her local IRS office in Fort Lauderdale, she was turned away as they were over capacity. Her second attempt to get answers, she arrived 30 minutes before the office opened only to find a line wrapped around the building. After 7 hours of waiting without food, water, and her cell phone because none are allowed within the federal office building, Reid finally met with an IRS representative who’s fist question was, “Are you sure you didn’t already file your taxes?”. After Reid made it clear that she didn’t double file her taxes, the IRS representative then handed her a pamphlet about identity theft and told her that it would be at least 6 months before she would receive her tax refund. Reid, a single mother of three, can’t afford to wait for the IRS to investigate that she is the “real” Tamay Reid, entitled to almost $5,000 in tax refunds. Reid describes her unfortunate incident as “identity rape” and feels as if she’s been violated. She can’t help but be concerned who else may be using or selling her social security number for personal gain and how it may affect her credit and ultimately her life.
I believe the IRS hasn’t even scratched the surface with the recent arrest of 105 people. The IRS will not confirm how many pending IRS tax refund fraud cases they currently have open this year but in 2011, they stated they had received more than 226,000 cases of identity theft. In addition, the Taxpayer Advocate Service has had a 97% increase in the number of stolen identity cases for 2011. I believe the number of people victimized by fraudsters this tax season will grow exponentially as the season has just begun and most citizens have not even begun to think about filing their taxes yet.
There are multiple types of fraudsters out there that could be using your social security number to collect YOUR tax refund. First, there is the common street criminal, dumpster diver. This type of fraudster will rummage through your garbage in hopes that you may not have shredded documents containing personal identifiable information like your social. There is also the opportunistic fraudster and this kind is usually someone close to you, a friend or family member. They typically don’t steal but have a situation or emergency in their life where they really need money and will capitalize on information that they can easily access. Lastly, the most complex and frightening fraudster is the organized crime ring which involves multiple persons working together to steal someone’s identity.
Crime rings typically target hundreds to thousands of identities at once. They use different means to capture information that include infiltrating business environments either through an internal informant or through hacking in to a company’s network infrastructure that has vast amounts of personal information like banks, government organizations, schools, payroll companies, and staffing companies. The fraudster is privy to your personal information based on their position within a company and will steal your information and sell it to a superior fraudster that will carry out the act of filing for your taxes. In most cases, the person collecting the fraudulent refund will not be the same person that filed for it. Organized crime ring fraudsters do not carry out every task of fraud solely, instead they have multiple people involved which makes it more difficult for authorities to piece together and break up a crime ring.
There are ways to protect yourself from identity theft and ultimately tax refund fraud. First and foremost, everyone should have a shredder, an inexpensive and easily obtained machine that can save you from all types of fraud. Simply shredding documents even ones you may think can’t be used to steal your identity should still be shredded. It is a great habit to get in to and can save you money and future hassles down the road and it ultimately gives you peace of mind. On the same note, keeping documents with personal information such as last year’s tax e-file forms on a CD or flash drive rather than on your computer’s hard drive can protect you from potential computer hackers looking to steal your identity. In addition, you should be vigilant about who you give your social security number to. Friends and family members do not need to know your social security number for any reason. It is important to remember that your social security number belongs to you and no one else and safeguarding it should be your top priority.
Protecting yourself against organized crime rings can be more difficult but there are red flags to look for. In a recent IRS tax refund case in New York, phony craigslist ads for housing and jobs were used to rip off social security numbers used to file fraudulent tax refunds. The fraudsters posed as employers and apartment rental agents and once victims inquired about the posts, they would receive employment and rental applications that sought their name, address, birth date, and social security number. You should only give out your social security number when absolutely necessary. You should never give your social security number over the phone, by mail, or on the Internet unless you have a previous relationship and you initiated the contact. In addition, you do not need to provide your social security number on job applications. If the potential employer is insisting, you should offer to provide it during an in-person interview or when a background check is conducted. Do not fill out rental applications that ask for your personal identifiable information until you have actually seen the property yourself and met with the landlord or agent first.
It is important to check your credit report yearly. Federal law gives you the right to one free report each year. It is important to check your report for any discrepancies in addresses, credit inquiries, or accounts that seem unfamiliar. Lastly, be wary of any unsought calls, emails or mailings that request your personal information. Never verify your information to an unsolicited caller or through an email.
If you have been a target of IRS tax refund fraud, be sure to inform your employer as you may not be the only victim and this could possibly reveal issues within your company or companies that do business with your employer like 3rd party payroll firms.
If you find that you have been victimized by this type of fraud, please go to IRS.gov, and download IRS form #14039, Identity Theft Affidavit. Complete the form, and also make a copy of one form of identification like passport or social security card, and follow the instructions on the form on how to file with IRS.