A recent CNBC article about tax identity fraud titled “Florida Hit by ‘Tsunami’ of Tax Identity Fraud“ proves that while the IRS has attempted to deal with this major tax issue, identity thieves are managing to stay one step ahead of them. In a previous post on the Tax Resolution University blog, I interviewed on camera a friend and tax identity fraud victim, Michael “Sully” Sullivan from the Big Biz Show. Sully’s story is all too common: he and his accountant discovered his refund check had been mailed to a Robert Sullivan in Florida – yet Sully hadn’t even filed his tax return!
Tax Identity Theft Grows 25% in 3 years
According to the CNBC article, tax identity fraud has grown in the last three years into a massive, often dangerous, illegal industry that the U.S. Treasury Department says could cost the nation $21 billion over the next five years. To give you some idea of how big, nationwide, the number of cases of tax identity theft detected by authorities soared to more than 1.2 million cases in 2012 from only 48,000 in 2008. United States Attorney for south Florida, Wifredo Ferrer calls this situation, “a tsunami of fraud.”
Florida Hit Hardest by Tax Identity Theft
Florida appears to be the epicenter with most of the fraud concentrated in Miami and Tampa. According to the article, Miami has 46 times the per-capita rate of false tax refund claims than the rest of the country, and 70 times the national average in dollar terms. Thieves are taking advantage of Florida’s high proportion of older more vulnerable residents.
Tax Identity Crime Linked to Violent Crime and Armed Gang Activity
Identity theft rings will steal the master key from a postal worker (sometimes killing them in the process) to gather personal taxpayer information. Using these stolen names and Social Security numbers, criminals then file phony electronic tax forms to claim refunds well before the taxpayer has had a chance to prepare their tax refunds or the Internal Revenue Service to discover the fraud.
How to Protect Yourself from Tax Identity Fraud
According to Attorney Ferrer, all the fraudsters need is a taxpayers name and the tax ID number. Since it could happen to anyone at any time, the following are ten steps you can take to protect yourself from tax identity fraud:
- Don’t be misled by sites that claim to be the IRS but end in .com, .net, .org. The address of the official IRS website is www.irs.gov. Thieves will use phony websites (that look real) to gain your personal and financial information then use this information to commit identity theft or steal your money. Word to the wise: Never give personal or financial information out online even if you think it is the IRS or another taxing authority.
- If anyone believes their identity may have been stolen, they are encouraged to file Form 14098 paperwork with the IRS to protect their tax account from identity theft issues.
For Sully and folks who are already victims of tax identity fraud, here the some helpful and important solutions you can do immediately to begin to unwind your tax problem:
- Contact the IRS, fill out Form 14098, file 2011 taxes and inquire about new social security number
- Contact your local Police Department to file a report
- Contact Consumer Affairs to file a report
- Contact the State Attorney General’s office and your City attorney to file a report
- File a complaint with the Consumer Financial Protection Bureau (CFPB)
- Contact all three credit agencies to see if other types of credit were used in his name.
- If you receive a notice of liability from the IRS, contact IRS Collections immediately to let them know there is an identity theft tax issue and to put a Collection Hold on his record. This step is to avoid the risk of an IRS levy.
The IRS is looking to preempt tax fraud by authenticating social security numbers of both living and deceased taxpayers at the time of filing. However, in the eyes of the IRS, you the taxpayer are responsible for information provided to them meaning they will come after you for payment no matter what. It’s in your best interest to make sure your tax account is clean. For $10-25 per month you can buy a plan that protects your tax refund before the IRS contacts you or an emergency plan from Tax Audit Defense that can help you should this nightmare happen to you.