Tax refund related identity theft is on the rise

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Someone may be using your Social Security number and personal identifying information to steal your identity--and tax refund.  Tax filing season is yet another favorite time of year for  identity thieves.  According to a Scripps Howard News Service investigation that looked at U.S. Federal Trade Commission identity theft records from 2005-2010, the type of identity theft that saw the biggest increase in those years was tax return-related fraud.

Dee Platt found out the hard way that the IRS is slow to admit its mistakes, even when the evidence is overwhelming that identity theft and not tax fraud is what's at work.  Platt--who knew that her identity had been stolen--was awaiting a refund check.  It never came.  When she notified the IRS, she learned that her refund had been sent to the person who had stolen her identity.  The IRS admitted no wrong doing, and in fact sent Platt a bill for the interest and penalties on the money she should have received.  She finally had to hire an independent investigator to straighten out the mess.  All this because her identity was stolen.

This isn't an isolated case. (see updates below) 

Hundreds of fire and police officials in Florida have had their tax refunds hi-jacked.  When several of the officers tried to file their taxes, they discovered--just like Dee--that someone had beaten them to the punch.  Returns had been filed and refunds had been sent out, but not on behalf of the actual taxpayers.  The police have yet to get to the bottom of the scam, but it's been noted that the two cities affected--Delray Beach and Oakland Park--use the same retirement plan administrator.  

Educating the public on the various types of identity theft and available defenses we can take advantage of today, is key when it comes to avoiding fraud. Many people seem surprised to hear of this type of identity theft, but once you begin looking around; there is plenty of evidence that tax refund fraud is on the rise.  In many cases, like these reported in the Christian Science Monitor or summarized Walletpop, tax preparers are found to have boosted their clients' information, filed the returns and kept the refunds.

Even if you prepare your own taxes, you could still be at risk.  Identity thieves have managed to steal millions of taxpayer dollars by filing fraudulent tax returns using the names and Social Security numbers of other people--dead or alive. Thanks to electronic filing, anyone with access to your social security number and your W-2 form could file your tax return--and simply have the refund check mailed to a different address.  Your W-2 could be intercepted in the mail, at the accounting and payroll company or even at your place of business.  

Disliking the IRS may be our national pastime, but in this case I don't think the IRS is entirely to blame.  It's the ease with which thieves can impersonate a taxpayer from a distance.  True, the IRS needs to increase its ability to detect fraudulent returns (they're working on it), but they are also bringing awareness to identity theft and tax fraud.

If you get an email that claims to be from the IRS, it isn't. The IRS does not send unsolicited emails -nor will they tweet you. They will not contact you on Facebook asking you to fill out a "special form" to receive your tax refund.  If you find yourself questioning the validity of any inquiry claiming to be initiated by the IRS, contact them directly.  Just like with any email scam, fraudsters use a hook they know will attract the most victims.  Don't take the bait!

See also: Inmates file false refund: Video included

April 24: UPDATE:

Identity Theft Victims Complain: Tax Refunds Sent to Impostors--again! 

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