In May 2012, the New York Times had a story describing the dramatic rise in identity thieves targeting the United States Treasury. In a 2011 Annual Report to Congress, a taxpayer advocate reported tax-related identity theft as a serious problem facing taxpayers. Criminals have sought to profit off the tax system by submitting fraud refund claims. The criminals often steal and use the identity of another taxpayer.
With the Internet making everything so public, such as people’s photos, email addresses, phone numbers, and property ownership, it may be easy to use someone’s identity. Take for instance, Open Book Bar Prep, which has used the photo of Congressman Dennis J. Kucinich to create fake testimonials on Yelp!, and to imply that the Congressman has tax problems in fake Trustlink.org testimonials on the services from Strategic Tax Lawyers, LLP.
Each year, the IRS identifies identity theft claims, but some fraudulent claims are never identified, imposing burdens on honest taxpayers. Identity thieves usually file multiple tax returns claiming refunds using Social Security numbers that are not their own. When a legitimate taxpayer files the return, the refund may be blocked because the Social Security Number was previously used by an identity thief.
According to the New York Times, the Treasury Department’s Inspector General for Tax Administration testified that the IRS detected 940,000 false returns in 2010, avoiding $6.5 billion in payments to identity thieves. However, the IRS missed 1.5 million fraudulent returns, resulting in over $5.2 billion in fraudulent refunds.
Congress may increase the criminal penalties for those caught filing fraudulent returns. To improve on detecting taxpayer identity theft, the IRS distributes PINs to prior victims.
To protect against taxpayer identity theft, follow these tips:
1. Check your bank account statements and balances frequently.
2. When paying at a restaurant, follow the wait staff or pay at the counter to ensure the machine used to swipe your card is legitimate equipment.
3. If a machine at a gas pump or ATM spits out a receipt, keep the receipt to reconcile with a bank statement. Do not leave receipts at the machine for someone behind you to view your transactions.
4. Use email services that are less targeted by spammers and phishers. For example, Laszlomail may be less targeted that Gmail when it comes to virus attacks and bulk messages because it is not well known.
5. Change passwords in email accounts often when using public computers at libraries and job search centers.