Today, I want to talk to all of you upstanding, tax-paying citizens about a not-so-cheery topic – tax refund fraud. I am neither an attorney nor an IRS agent. This blog is not about government losses. I am merely your accounting fairy godmother. As such, I want to do my best to protect your hard-earned dollars from this country’s identity theft epidemic!  IRS tax refund thieves use stolen identities to divert money to themselves. The fraudsters come from all walks of life – mothers, brothers, even former IRS employees – all tempted by one of the easiest “get rich quick” schemes there is. Networks of them swipe bigger sums of money from the U.S. government each year. We’re talking BILLIONS.

It doesn’t help that their whole scheme is simpler than credit card fraud and about as easy as shoplifting. The crooks just fill out a few free forms and wait for a check…

Step 1: Steal unsuspecting citizen’s personal information.

Step 2: Use it along with some legitimate information to receive someone else’s tax refund.

That’s it. Part of the appeal is how little effort and how few resources it takes. It’s one “get rich quick” ploy that requires no money to get going. Then, when it works, there’s a good chance the perp gets to keep 100% of that refund check.

In the past three years refund fraud has increased exponentially. The Internal Revenue Service launched nearly 1,500 investigations in the past fiscal year, up from just 276 in 2011. The IRS says that a typical case for a taxpayer whose identity is stolen takes about 180 days to resolve. Some other sources find an average resolution time of 312 days. In other words, having your identity (and your refund check!) stolen is not fun and getting it back can take almost a YEAR.

Federal authorities are issuing “tips” on avoiding identity theft but they like to point out the problem is sometimes unavoidable, fueled by corruption among those preparing tax returns, cashing misdirecting checks and handling your information in the first place.  Here are the some of the tips the IRS offers to protect you from becoming a fraud victim:

  • Don’t carry your Social Security card or any documents with your SSN or Individual Taxpayer Identification Number (ITIN) on it.
  • Don’t give a business your SSN or ITIN just because they ask. Give it only when required.
  • Check your credit report every 12 months.
  • Protect your personal computers by using firewalls and virus protection software. Update security patches and change passwords for Internet accounts regularly.
  • Don’t give personal information over the phone, through the mail or on the Internet unless you initiated the communication or you are sure you know who you are dealing with.

And here are some extra tips from ME:

  • Keep your financial information private. This goes beyond hiding your PIN number and your account info. Don’t talk about your salary, your savings, or even certain transactions you make, outside of your home… unless you’re talking to a trustworthy accountant, of course!  When you expect to have folks over to your home for dinner or to watch the game make sure that all of your important documents are locked up in a safe and not on the kitchen counter for someone to see or snap a quick pic of with their smart phone.
  • File your tax return early! If you file early, the IRS will see right away that something fishy is happening if someone else tries to file as you. They may be able to stop it before they make a dreadful mistake. If you file early and they still issue the wrong refund, you’ll have more time to fix it than if you’d waited for the April rush.

One final tip:

  • Research your tax professional.  Don’t just let any Tom, Dick, or Harry file your tax returns for you. Someone offering you free or cheap tax return fees may be after more than just that tax prep fee.  They may be after your identity!  If you find that you are a victim of identity theft, feel free to contact my office. We can help you submit the necessary documents to the IRS, local Sheriff’s department (you need to file a police report), and credit bureaus.


Buffie the Tax Heiress