Experts say tax ID theft is on the rise
The tax filing season is heating up, and so are tax filing scams. You go to file your returns and discover someone else got there first. It often takes months to unravel the scheme
"I called the IRS and they told me, are you sure you haven't filed?" explained Alicia Rae of Renton as she recounted her filing nightmare last year.
Rae tried to file her 2011 return electronically on January 1st of last year, expecting a refund of $700. The local college student was counting on the money to buy a laptop for her classes. But an ID thief had already filed for a refund in her name and using her social security number. As a result, she had to mail a paper return- plus copies of personal records to prove her identity. She says despite multiple calls to find out what was going on, she could never get a full response.
"Their explanation of the whole thing was just well, 'Wait. And you'll get it when you get it.' So their whole attitude was just really frustrating," Rae said.
Ida Lim of Kent also had her electronic filing rejected when she filed last February. She also had to mail a paper return and send proof of who she was for an investigation.
"Everyone I talked to was very nice, but they couldn't give me any information," Lim said.
Lim says it took 3 months just to confirm her nearly $4,000 refund was claimed by a thief- but she still had to wait.
"I called them on May first and I talked to a representative for the IRS and they told me I had to file an Identity theft Affidavit," she said.
Tax ID theft is escalating to staggering proportions. According to recent IRS data in fiscal year 2011 (Oct. 1, 2010 - Sept. 30, 2011) : 276 investigations totaling $14 Billion in fraudulent returns. Fiscal 2012: 898 cases with total fraud of $20 Billion. At the rate things are going, the number of returns filed by identity thieves in 2013 could double last year's numbers.
"We pursue them criminally," said Kenneth Hines, Special Agent In Charge of the IRS Criminal Investigation Division. "Our main goal is to identify them. Stop them. Incarcerate them."
Hines says the IRS is increasing enforcement efforts with arrests across the country, including our state. Last month, federal agents filed formal complaints against Barbara Holly Stahlman of Puyallup for allegedly filing fraudulent returns from her home, using other people's names and identifying information. Stahlman is accused of 10 counts of tax fraud totaling nearly $50,000.
"When we work these identity theft cases, we don't work them alone. We have our partners at the Secret Service, U.S. Postal Inspectors. These types of schemes touch a lot of areas. They touch the tax system, they touch the mail system, they touch debit cards or credit cards- prepaid debit cards, prepaid credit cards."
Hines says there are a number of ways suspects obtain other people's identities and the victims are typically random. It could be a disreputable person offering tax preparation services, which is alleged to have happened in the Stahlman case.
"It's a random process on how some of these identities get into the hands of the thieves," Hines explained. "Companies' data bases being hacked or taken, or people having them and selling them."
Investigators say some thieves pay friends or relatives who have access to personal information because of where they work. Some crooks call or email random consumers and claim to be with the IRS. The Internal Revenue Service never contacts people by email or phone asking for personal tax or financial information.
One of the first signs you may be a tax ID theft victim, is if you have trouble trying to file electronically. If you're told that you already filed, or see that the amount of your refund other information is off- you need to call the IRS right away. Expect to send documents regarding the suspected identity theft and documents proving your identity. And be persistent. Both Rae and Lim say the most frustrating part of their experiences was lack of updated communication from the IRS, and difficulty getting an actual human on the phone. The women also advise tax ID theft victims to plan for the investigation process to take long time - unless you're fortunate enough to catch the theft as soon as the illegal return was filed.
It took 7 months for Rae to get her refund. Lim had to wait 11 months. Both refunds included interest for the time they had to wait.
"It was obvious I was the victim," Lim said. "I shouldn't have had to wait until this year to get my refund. I understand they're under staffed, I understand that this happens a lot, but once it's confirmed, I don't think they had a right to keep my money. And I really needed that money."
Both women filed early this year and have refunds coming. They're on pins and needles about what will happen this year.
"Whoever it is, still obviously has my social security number," said Rae. "I'm kind of concerned just for the future- of problems it might cause." said Rae.
Tax ID theft victims are issued a special security protection PIN for their future fillings, to confirm they're they legit taxpayer. According to the IRS, 250,000 security PINS were issued last year. So far this filing season the number is up to 770,000.
More information is available online.