Identity Theft May Cost US Billions in Tax Refund Fraud

The Internal Revenue Service (IRS) revealed in its latest audit a dazzling sum of money paid to lawbreakers who filed counterfeit tax returns on behalf of deceased or socially assisted citizens.

The fiscal audit “focuses on identity theft related to tax refunds, which occurs when an individual uses another person`s name and Social Security Number to file a fraudulent tax return in order to obtain a fraudulent tax refund.“

Apparently the US might lose some $21 billion to foul play from identity theft. More problematic is that the IRS doesn`t have complete data on how criminals operate. They don`t know exactly “how a return was filed, income information from W-2 forms, the amount of refunds and where those refunds were sent“, according to the Treasury Inspector General for Tax Administration (TIGTA). This makes fighting this phenomenon way harder.

The IRS has reports of potentially fraudulent tax returns filed from some e-mail addresses and placed them under observation. Some tax return schemes have resulted in money deposited in a debit-card account somewhere in Florida. These schemes apparently use Social Security Numbers of deceased people or those on public social assistance.

TIGTA said “the impact of identity theft on tax administration is significantly greater than the amount the IRS detects and prevents. Using the characteristics of confirmed identity theft, TIGTA identified potentially fraudulent tax refunds in excess of &5.2 billion that were issued by the IRS.“

Identity theft, the main vector for financial fraud, has taken worrying proportions in the US following the boom in personal information disclosed by US citizens. Highly organized criminal rings specialize in collecting social security numbers under various pretexts or in targeted phishing attacks.