Death and taxes - identity thieves put both to work with latest scam

They* say that the only certainties in life are death and taxes.  Identity thieves are now taking advantage of both in a new scam.  Thanks in part to the publication of the "Death Master File" (sounds like something from a Hitchcock movie) that lists the Social Security number and other information about the deceased, identity thieves are being able to file tax returns in the names of dead people or use deceased persons as dependents, thereby increasing their tax refunds.

According to the IRS, tax related identity theft has victimized nearly 500,000 tax payers since 2008.  The IRS has already flagged another 91,000 suspicious returns for investigation this year.

Another problem is that the IRS won't tell victims of this or other tax related identity theft who the suspected perpetrator is.  This protects the privacy of the criminal but also makes it harder for the victim to defend himself from other forms of identity theft committed by the criminal.

I have had many calls about tax refund identity theft over the past two years.  The problem is there really isn't anyone to sue (unlike when accounts are fraudulently opened, you can sue the company that negligently opened the fraud account or the credit bureau that continued to report the fraud account after being alerted to its fraudulent nature).  So its hard for me to do anything with these cases other than give the victim some advice, primarily do whatever the IRS says so they can get it straightened out.   And that's the same advice I give to all of you, that and be vigilant and diligent in your fight if your identity is ever stolen.

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*  As my wife always says, who is this "they" you speak of?

Identity theft ranked No. 1 of the dirty dozen tax frauds

The IRS annually lists the "dirty dozen" tax scams in an effort to protect the public and itself. This year, identity theft is ranked as the top of the dirty dozen scams.

Identity thieves use a taxpayer's identity to file a tax return and fraudulently obtain a tax refund. The IRS reported that it blocked $1.4 Billion from going to the wrong person last year. Small wonder identity theft is ranked no. 1.

Other scams include "phishing" (i.e. tricking people into revealing personal identifiers), hiding funds offshore, reporting false income and abuse of charitable organizations.

If you suspect you are the victim of tax return identity theft, you should contact the IRS immediately.

Tax Refund Identity Theft

Its that time of year again.  Millions will file their tax returns between now and April 15.   An increasing number of those tax return filers will find to their dismay that their refunds have already been swiped by an identity thief.

The scam is pretty simple.  Identity thieves forge tax returns using your identifying information.  All that has to happen is that the Social Security number must match the name on file with the IRS.  The address does not have to match, since the person could have moved since the last tax return was filed.  The identity thieves use this loophole to provide an address that they can use to pick up the tax refund.

By filing these forged tax returns early and using bogus income totals that result in a refund, the identity thieves receive the refunds before the unsuspecting victim ever files his or her return.

If this happens to you, immediately contact the IRS.  They will provide you with the appropriate forms to dispute the fraudulent tax returns and obtain your rightful refund (assuming you are eligible for a refund).  Also, only use reputable tax return preparers, as a lot of this type of identity theft seems to occur when less than professional tax return companies are used the year before.

The IRS has allegedly stepped up its efforts to prevent this type of identity theft.  They have allegedly added some "filters" to the screening process that will supposedly catch this fraud at the outset.  I hope this is true as I have seen a marked increase in calls to my office about this type of identity theft.  And, unfortunately, there is usually no legal recourse that I can use to help these victims (unlike victims of traditional identity theft) so its up to the IRS to take measures to protect the public from this type of fraud.

Its tax time ... which means its time for tax time scams!

In my line of work as a consumer attorney, I see the tragic results of a lot of different types of scams.  One type of scam that I am seeing more of is scams involving tax returns.

A couple of tips -

First, never sign a blank return.  That's just dumb.  That return can then be used to send your refund to some other person's account or some other similar scam. 

Second, never pay someone a percentage of your refund to prepare your tax return.  That is also silly and usually means the tax return preparer is less than above board.  A legit tax preparer will charge you a flat fee or a set hourly fee.

Lastly, never use any tax preparer that tries to get you to make false or misleading deductions or do anything else that's not totally accurate.  Doing so just brings the IRS to your door and where will that tax preparer be?  I don't know but neither will you, so you will be on your own.  Reminds me of a cartoon I saw one time about a guy visiting his doctor.  He asks the doctor to recommend a good laxative.  The doctor replies "A letter from the IRS always works for me."

Don't be that guy.