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Fight back against income tax return identity theft

While tax time has come and gone for most, hundreds of thousands have reported they have fallen victim to the number one crime in America – Identity Theft.

Or in the case of the illegally filed tax return – tax return identity theft.

According to the Internal Revenue Service, more than 850,000 tax returns last year were associated with fraudulent tax refunds involving identity theft.  Most victims are unaware they have been victimized until they file their taxes, only to learn that someone else has already claimed a refund.

This is of particular concern for Floridians because the state has the most identity theft complaints in the country.

At a news conference last month, Rep. Debbie Wasserman Schultz (D-Fla.) and House Judiciary Committee Chairman Lamar Smith (R-Texas) introduced legislation to help combat the growing problem of tax return identity theft.

“Stopping Tax Offenders and Prosecuting Identity Theft Act” - or STOP IT, (H.R. 4362) seeks to protect the individual taxpayer as well as groups who have been victimized by tax-return identity theft.

The bill would also require the U.S. Department of Justice to focus on communities that have been hardest hit by the identity theft crisis. 

“The federal government must become more vigilant in stopping tax-related identity theft,” stated Wasserman Schultz, during a press conference held at the Broward Sheriff’s Office in anticipation of filing the legislation. 

Both Smith and Wasserman Schultz said they will push for tougher sentences — a minimum two-year prison sentence for each tax return identity theft conviction instead of the current up-to-two-year term.  

“That would help deter fraud,” added Wasserman Schultz.  Right now, “it is a low-risk crime” that cost American taxpayers approximately $5.8 billion last year in fraudulent tax refunds.

State, federal and local law enforcement officials agree that tax return identity theft is running rampant nationwide.

“262,000 fraudulent tax returns and $1.4 billion in losses were prevented nationwide by the Internal Revenue Service in 2011,” said Mike Dobinski, an IRS spokesman.  “So far, 215,000 fraudulent returns accounting for over $1.15 billion in refunds have been prevented this year.” 

In 2010, the IRS saw fewer than 50,000 falsified returns accounting for $247 million in fraudulent refunds.

Nearly a quarter of Americans filing complaints to the Federal Trade Commission about identity theft last year indicated that they had fallen victim to tax or wage fraud.  That number has more than doubled since 2008, when only 12.3 percent of identity theft complaints were related to tax or wage fraud. 

In 2011, the FTC received nearly 280,000 complaints about identity theft, an increase of more than 10 percent from the previous year.

Falsified tax returns are especially easy for scammers to manipulate as the IRS does not authenticate tax returns or W-2 forms.  All an identity thief needs is someone’s name and social security number, a new address, and a bank account or debit card number.

In some cases, identity thieves make up names and social security numbers fully aware that the IRS does not match up the information prior to issuing a refund.

As a result of online filing and rapid refunds, thieves are able to have fraudulent refunds automatically deposited to prepaid credit or debit cards in less than two weeks. 

“Privacy is up for grabs these days from every direction,” stated Florida State Representative Denise Grimsley (R-Sebring), Chairman of the House Appropriations Committee.  “Frauds are bilking citizens and the system of millions because so much of our personal information is exposed.” 

According to the Federal Bureau of Investigation, the state of Florida ranks number one in the nation for identity theft complaints with 130,449 filed or 694 per 100,000 in population. 

Dobinski, the IRS spokesman, did acknowledge that the Internal Revenue Service does not routinely match taxpayer names with Social Security numbers.  “It all starts with the Social Security number,” Dobinski stated.

Tax return identity theft has reached such epidemic proportions that it tops the list of the IRS’s Dirty Dozen Tax Scams for 2012. 

Victims of identity theft or taxpayers who believe they are at risk of identity theft as a result of lost or stolen personal information should contact the IRS Identity Protection Specialized Unit at 800-908-4490.   Taxpayers will be required to complete an IRS Identity Theft Affidavit – Form 14039 – to initiate the investigation process.  

Taxpayers may also wish to consult the Taxpayer Guide to Identity Theft or the IRS Identity Theft Protection page in an effort to learn more about tax return identity theft. 

“Identity theft can be frustrating for victims,” Dobinski concluded. “There are a number of things the IRS is doing to detect and deter fraud.  We’ve increased the use of screening and filtering.”

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