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Timely tip: Report on taxpayer identity theft

April 14, 2014 01:30

By Al Sunshine, RTDNA Contributor

It could start as a call to your newsroom or tip line: “I filed my taxes, but my return was rejected by the IRS because somebody else already filed in my name. What happened? What should I do? I need my refund and somebody else got my money.”
That's the kind of call I got a few years ago from Miami Waitress Laurie King. She found out she was the latest victim in a massive Identity theft scam targeting phony tax returns using other people's tax Information, including her Social Security number. After repeated attempts to get her refund from the IRS ended up with no help, she contacted me. I put her in touch with her local senator, Bill Nelson. He had a special group in his office to assist victims of tax refund payer ID theft. She finally got her refund but she had to wait almost a full year.

It's been even worse for other victims. I’ve reported about local taxpayers having their tax IDs stolen for several years in a row,  even though they reported the scam to the IRS when they were first victimized. The agency now insists it's doing a better job identifying fraudulent tax returns and making sure refunds go to taxpayers and not ID Thieves.
April 15 marks the fourth anniversary of tax ID fraud exploding nationwide. A U.S. Treasury Department Inspector Generals’ report last fall found an estimated 1.1 million “undetected tax returns” resulting in $3.6 billion in phony refunds to the crooks. That figure was down from $5.2 billion in 2010.

The losses over the past four years may be staggering to the federal government, but they're worse for victims. I found a single mother of three desperately trying to get help a few years ago at a local IRS office because her refund check, which she needed for family expenses, was already claimed by an ID thief. The IRS used to let me into their local customer service areas with a camera. After that taxpayer complained to me about horrible service from the IRS, I suddenly wasn’t allowed in with my crew any more.
I was kept busy on the tax ID theft beat for years for good reason. It turns out, without knowing it at the time, I was at ground zero for the scam. Federal prosecutors found themselves deluged with so many local complaints in South Florida, tax ID fraud investigations quickly became a priority for U.S. attorneys like Miami’s Wifredo Ferre. “While identity theft in Florida ranks highest in the United States, the identity theft rate in Miami has reached near epidemic proportions,” Ferre said, adding that ID theft has become a “tsunami” of tax-fraud. Checking the numbers, he said, “Florida’s rate is dwarfed by that in the Miami area, with 324 complaints per 100,000 residents.”
According to the Inspector Generals’ fall 2013 report, South Florida was the worst place in the country for the scam, using legitimate taxpayer IDs to file bogus returns. The top five U-S cities using fraudulent SSNs:
  • Miami
  • Chicago
  • Detroit
  • Atlanta
  • Houston
Another problem? The crooks were using multiple returns and requesting refunds in the form of electronic payments or credit cards tied to the same bank accounts again and again. The IRS wasn’t even tracking the millions of dollars all going to the same place. According to the Inspector Generals’ September 2013 findings: “The IRS has still not taken actions to prevent multiple tax refunds from being deposited to the same bank account. This continues to provide identity thieves with an easy method to obtain fraudulent tax refunds”
Making matters worse, tax ID fraud took on a global component, as bogus tax refunds were increasingly heading overseas, making tracking down the crooks harder. The Treasury Department's Inspector General found the top five foreign countries getting fraudulent Returns for 2011 season were:
  • Bulgaria
  • Lithuania
  • Ireland
  • Chine
  • Canada
After billions of dollars in losses and numerous Congressional hearings, the IRS has reportedly tightened up some procedures. But it won't go into many details exactly what they've done, most likely for security reasons. The IG report concludes, “Detection has Improved; however, Identity theft continues to result in billions of dollars in potentially fraudulent tax refunds.”
Covering this kind of major white-collar crime is dificult.
  • The IRS will not discuss individual taxpayers cases.
  • The IRS will not go into specific details how it's trying to tighten up its lax computer security procedures to stop this scam.
  • The IRS will not discuss tax return ID theft in most areas, instead referring all questions to their PIO folks in Washington
  • The IRS in most cases may not let reporters into public customer assistance areas to interview victims.
But local, state and federal prosecutors may be open to discussing the problem in your markets. The Treasury Department's Office of the Inspector General is very open about its publically released investigations. The outside of IRS offices should be fair game to stake out and ask taxpayers if they've been ripped off and what they think about how they've been treated by the IRS, as they wait patiently for their refunds.
Why did it happen in the first place? There is plenty of blame to go around. For years, the IRS asked Congress to update its computer systems and improve security against these kinds of cyber crimes. For years, Congress failed to provide enough funding to allow the agency to update computers and hire more cyber crime specialists. So this is not just a story about yet another “Inept” federal agency. Some responsibility should fall on your state's Congressional delegation.
This story has taken a personal turn for me as well, based in South Florida. Last tax season, my daughters’ tax return was rejected because somebody already filed a fraudulent return in her name. A few weeks later the same thing happened to me. After a few months, I finally found out that in my case, the attempt was intercepted by the IRS and no phony refund was ever issued.

This is a nationwide scam that’s already cost Uncle Sam billions of dollars and probably isn't close to being solved yet. It’s a perfect issue for the media to act as an advocate for our viewers, listeners and readers. Reporters should be demanding to know what's being done to better protect our money and more importantly, what's being done to get our viewers their hard-earned tax refunds back in a timely manner.

To read more about the issue, see what government agencies are saying. You can read the Treasury Department's report from 2013, a release from the IRS about how it is combatting the problem, the FBI's efforts to catch identity theives, tips on how to prevent identity theft, and stories about the problem from the Miami Herald and the AARP.

Is taypayer identity theft happening in your market? How have you been reporting on the problem? Let us know in the comments below.


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