The IRS wants to show taxpayers it is taking identity theft seriously.
Today, the agency announced it conducted a 32-state sweep in recent weeks that targeted 389 identity theft suspects and led to 734 enforcement actions — from complaints to indictments and arrests — in January. It had help from the Department of Justice and U.S. Attorneys' offices.
The IRS posted a map of its crackdown, which includes several cases in Maryland. According to the IRS, this includes an indictment in January of two brothers who allegedly filed fake returns from April 2007 to January 2012, collecting refunds ranging from about $1,500 to $4,950. In another case, an Owings Mills woman was indicted last month for allegedly obtaining more than $221,000 in fraudulent refunds.
Identity theft is a big problem not only for filers, but also for the American taxpayer. Thieves use stolen Social Security numbers to file fake returns with inflated deductions, generating a fat refund. Meanwhile, the real taxpayer isn’t aware this is happening until he or she files a return. The IRS then rejects that return, because it already paid out a refund to that Social Security number. Legitimate taxpayers then have to go through a lengthy process of proving their identity to the IRS.
The cost to American taxpayers is well into the billions of dollars that have been paid out on phony returns.
When announcing its crackdown, the IRS also said its auditors and investigators visited 197 check-cashing businesses to make sure they weren’t assisting thieves by cashing their refund checks.
The IRS says it tries to screen out false returns at the onset, and during the last fiscal year prevented more than $20 billion in fraudulent refunds from being sent out. That’s up from $14 billion the year before.
Also, the IRS gives a special PIN number for victims of ID theft so they can avoid delays when filing returns. In the 2012 tax season, the IRS handed out 250,000 such PIN numbers. Already this tax season, the IRS has issued 770,000.
The IRS advises taxpayers to protect their Social Security numbers. But one way to prevent theft of your refund is to file early — before a thief has a chance to do so.