Tax refund ID theft hit local communities

Tax-related identity theft is surging across Ohio and the United States, with a national taxpayer advocate telling Congress that the IRS has nearly 650,000 active cases.

In Ohio, Attorney General Mike DeWine’s office is investigating 46 tax-related ID theft cases, including some in Butler, Greene, Miami and Warren counties.

The Internal Revenue Service, DeWine and other officials warn that thieves use others’ Social Security Numbers to get tax refunds or use that information to get jobs so that the Internal Revenue Service turns down the proper persons’ tax return for not reporting all income.

“Of all the tax-related identity theft complaints my office has on file, more than half of the complaints were made in March, and we still have a few days to go,” DeWine said Wednesday. “With the tax filing deadline just a few weeks away, it is important for consumers to be aware of these tax-related identity theft issues and how to prevent them.”

National Taxpayer Advocate Nina E. Olson reported to Congress in January that the IRS’s Identity Protection Specialized Unit saw 450,000 identity theft cases reported in fiscal year 2012. The Taxpayer Advocate Service has seen its own ID theft cases increase from 7,147 in fiscal year 2008 to 34,006 in fiscal year 2011 to 54,748 in fiscal year 2012.

Fairborn’s Shirley Freeland-Kline, 79, got an extension so that she didn’t have to file her 2011 taxes until last fall. But the retired civil service worker and contractor at Wright-Patterson Air Force Base found out in October that her $3,095 refund wouldn’t be coming because someone else filed under her Social Security Number.

“It’s still not resolved,” Freeland-Kline said. “This has been frustrating because you know, here I am, I worked all my life and been honest with the IRS all my life. And you get to an age where you don’t want to get hassled like that, believe me. And I’m at that age.”

Fortunately, Freeland-Kline’s ID theft was contained to the IRS, but she didn’t know that until she checked.

“I had to call all those credit rating companies, the Attorney General’s Office, I had to call the Social Security Office, I had to call a (Department of Defense) department,” she said. “It was just a lot of phone calls and you still don’t know anything. And you don’t know that they’re not going to do the same thing again this year.”

DeWine’s office said after filling out fake W-2 (wages) and Schedule C (business tax) forms, thieves either alter the direct deposit account or provide a pre-paid debit card number to receive the refund. DeWine’s office said that “Because the IRS does not verify W-2 information prior to issuing refunds, criminals are able to cheat consumers out of their tax refunds.”

Other scam artists pretend to be legitimate tax preparers and file bogus documents and change deposit information to bilk taxpayers out of their money. Criminals disappear with refunds and the consumer is responsible for any fraudulent information filed with the IRS.

“The problem has grown worse as organized criminal actors have found ways to steal the Social Security numbers (SSNs) of taxpayers, file tax returns using those taxpayers’ names and SSNs, and obtain fraudulent tax refunds,” Olson’s report states. “Then, when the real taxpayer files a return claiming the refund, that return is rejected. The impact on victims is significant. More than 75 percent of taxpayers filing returns are due refunds, which average some $3,000 and are not paid until the IRS fully resolves a case.”

Freeland-Kline said she hopes the IRS gives people secure PIN numbers instead of using Social Security Numbers. She said she also was told by one identity-theft hotline employee that 400 tax-ID thieves have been imprisoned. “They’re going after them,” Freeland-Kline said. “I hope they get every one of them.”

A Feb. 13 IRS document said sentences of between four months to 300 months have been handed down to those convicted. The number of those sentenced has grown from 45 in fiscal year 2010 to 80 in fiscal year 2011 to 223 in fiscal year 2012. Through Jan. 31 this year, 90 more have been sentenced in fiscal year 2013.

The problems for tax-related identity victims can compound year to year.

“Because the IRS takes more than six months, on average, to resolve stolen identity cases, many victims are left exposed to identity theft-related problems the following filing season,” Olson reports. “The IRS reports that it is making progress in blocking fraudulent claims and assisting victims, but as the problem grows, the IRS is falling further and further behind.”

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