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Personal Tax Return Fraud – What You need to know

I recently sent out a message to my CyberDust followers regarding personal tax return fraud. There were a surprising number of people who got back to me stating that they had no idea this was even a problem, so I decided to compile a number of important facts and statistics on the issue. Even though many of the statistics are a few years old, the trends all show a steady year-after-year growth in the number of tax return fraud cases. In other words, the numbers are older, but still very relevant.

The IRS does not seem to be getting better at stopping tax return fraud

In 2011/2012 the IRS sent 23,994 refund checks to a single Atlanta, GA address that totaled $46 Million. You think that is bad? The checks were all sent to “unauthorized” aliens.

In addition, this was not a one-time mistake. It was not even the only occurrence in Atlanta, GA. The IRS sent between 2,386 and 11,284 refund checks to three other Atlanta addresses totaling another 6 million dollars. The recipients were also “unauthorized” and again sent to a single address.

This shows the ineptness of the IRS and unfortunately was not a mistake that was made only once twice, or even three time, but many, across various states. The major accounts of tax return fraud occurred in Oxnard, California, Raleigh, North Carolina, Phoenix, Arizona, and Palm Beach Gardens, Florida.

Facts on Personal Tax Return Fraud

“Identity thieves have figured out that if they can obtain your Social Security number, they can file false tax returns with the IRS,” said Veronica Hyman-Pillot, IRS Special Agent in Charge-IRS Criminal Investigation. “It does not matter your political position, economic status, or social standing, you are susceptible to identity theft. No one is immune.

The IRS continues to increase its efforts against fraud. During 2012, the IRS protected $20 billion of fraudulent refunds, including those related to identity theft, compared with $14 billion in 2011, but much more needs to be done.

The IRS paid out $3.6 billion in fraudulent tax refunds to identity thieves last year (2012), according to an inspector general’s report.

In an audit conducted by TIGTA (Treasury Inspector General for Tax Administration) noted that during 2012, the IRS prevented the issuance of $20 billion of fraudulent refunds, including $8 billion related to identity theft, compared with $14 billion in 2011. The IRS says it stopped more than $12 billion in fraudulent refunds from going to identity thieves in 2013.

Victim Age Characteristics

Also included TIGTA’s IRS audit are categories for the types of individuals whose identities appear to have been stolen, including individuals who weren’t normally required to file a tax return. These categories accounted for 1,492,215 tax returns with estimated refund losses totaling $5,221,018,184.

Tax refund fraud targets TIGTA 2012

The elderly, students and young children account for the largest (and easiest) targets

The five categories included the deceased with 104,950 fraudulent tax returns and $415,047,568 in refunds, followed by the elderly (76,388 and $374,419,730), citizens of U.S. possessions (76,338 and $374,419,730), students, ages 16 to 20 (252,288 and $695,043,022), children under the age of 14 (2,274 and $3,960,327), and those whose income level doesn’t require tax return filing (952,612 and $3,345,064,109).

Tax Return Fraud committed by prisoners Behind Bars

An audit of IRS tax return fraud found that prisoners filed $1 billion in fraudulent tax returns in 2012. The dollar amount involved jumped from $166 million to $1 billion in fraudulent returns to inmates.

Fraud tax returns by prisoners

How to protect yourself against Tax Return Fraud

Unfortunately, there is no way to completely “protect yourself” from someone filing a fake tax return. If you have kids, or elderly people that you take care of, be sure to check with the IRS to make sure that no one has filed a tax return in their name.

For electronic filing, the IRS now requires the use of an IP PIN (Identity Protection Pin). An IP PIN is a six-digit number assigned to eligible taxpayers, and is now a requirement for electronic filing of Federal Tax Returns.

Unfortunately, that does not stop someone from mailing in a fraudulent tax return, which is why you should manually check for people that would not necessarily need to file a tax return.

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