Tax-related identity theft is not a victimless crime

    Tax-related identity theft is not a victimless crime. In fact, it’s happening right here in Maine.
Imagine this: an identity thief obtains Social Security numbers and other sensitive personal information from sources like hospitals, schools, or assisted living facilities, often by recruiting employees to steal that information. The perpetrator then uses this information to prepare and file fraudulent tax returns. And, as soon as the tax filing season opens in January, the criminal beats the real taxpayer to the IRS’s front door to increase the odds of stealing the refund.
Unfortunately, this isn’t just a hypothetical warning — as the Senate Special Committee on Aging discovered during a hearing on this topic — it’s a type of fraud has become all too common. The IRS reports that tax-related identity theft has grown from 52,000 cases in 2008 to nearly one million by 2012. Criminal gangs have figured out that it is cheaper and easier for them to steal taxpayers’ identities and hijack their tax refunds than it is to traffic in drugs, rob banks, and fence stolen property.
What’s more shocking is that this number may actually be understated. The Treasury Department’s Inspector General estimates that in 2011, the IRS processed approximately 1.5 million fraudulent tax returns — accounting for more than $5 billion in refunds.
And too often the victims are the most-vulnerable: the elderly citizens and those who earn so little they are not even required to file a tax return. By some estimates, more than 76,000 elderly citizens were victims of tax-related identity theft in 2011 alone.
More than 131 million individual income tax returns have been filed so far this year, according to the IRS — and more than 72 percent of these filers have claimed refunds, in an average amount of nearly $2,700. This is money that many families have been eagerly awaiting.
This isn’t a petty crime. It’s a sophisticated and lucrative criminal enterprise that adds up to an average refund of $3,500. And these syndicates have figured out how to game the system by requesting refunds on prepaid cards, which are like cash and can be used by thieves without ID or other verification.
The IRS has more than 3,000 employees working to address identity theft. Yet cases can take more than a year to resolve. In fact, taxpayers who have their refunds hijacked by fraudsters must wait to get the refunds to which they are entitled. Many are re-victimized year after year, and a substantial number become victims of other forms of identity fraud.
Surely more can be done.
That is why, together, we have written to the Secretary of the Treasury and the Commissioner of the IRS, urging them to combat this issue. Mainers should be on guard for tax-related identity theft. If you believe you have been a victim of tax-related identity theft, please contact the IRS’s Identity Protection Specialized Unit at 1-800-908-4490.