Many taxpayers are filing their tax returns this month. An increasing number of them will get an unwelcome surprise when they file, learning that someone has already filed using their personal information and collecting a fraudulent refund.
The IRS says tax refund fraud and identity theft are increasing and have resulted in a massive national sweep targeting identity theft suspects in 32 states and Puerto Rico. Tax preparer David Young, CPA, says thieves obtain a taxpayer's social security number and birth date, and then create a false W-2 form to claim a refund. The taxpayer doesn't learn about the crime until he or she files their tax return and gets a notice from the IRS that someone has already filed under that name and social security number. "
Because the IRS doesn't cross-check against the employer payroll records until after the refund has been submitted. So the thief will go early in the filing season, electronically file a tax return, make up a W-2 with your social security number, your date of birth, have your refund sent to them and that can go onto a debit card or into a bank account that is quickly closed."
Young says he has had several clients who have fallen victim to the scam, including a deceased person whose personal information was stolen to file a false return. He says taxpayers can also be targeted by unscrupulous tax preparers, who file on behalf of the client, but direct the tax refund to their own bank account.
The IRS has a special unit investigating identity theft and refund fraud. Young recommends anyone who suspects that they may be the victim of identity theft to contact the agency at 1-800-908-4490. Victims of tax refund fraud will be issued a 5-digit personal identification number (PIN) to use when filing their future returns. The IRS says a coast-to-coast crackdown against the crime in the month of January led to 734 enforcement actions, including indictments, complains and arrests.