Internal Revenue Service
Tax return identity theft has become an especially popular crime because of the relative ease identity thieves have in using someone's name and Social Security number in conjunction with a new address and bank account or debit card number to file a false return.

Washington, D.C. — Tax time has arrived.

While taxpayers received two extra days from the Internal Revenue Service to file their 2011 returns, hundreds of thousands have already reported that they have fallen victim to the No. 1 crime in America — identity theft.

Or in the case of an illegally filed tax return — tax return identity theft.

At a news conference Friday, U.S. Rep. Debbie Wasserman Schultz (D-FL) announced legislation she is introducing to crack down on what the IRS names as the No. 1 fraudulent scheme on its list of Dirty Dozen Tax Scams for 2012.

Tax return identity theft has become an especially popular crime because of the relative ease identity thieves have in using someone's name and Social Security number in conjunction with a new address and bank account or debit card number to file a false return.

Stopping Tax Offenders and Prosecuting Identity Theft Act — or STOP IT — seeks to protect the individual taxpayer as well as groups who have been victimized by tax-return identity theft, Wasserman Schultz said at a news conference held at the Broward Sheriff’s Office in Fort Lauderdale, Fla.

The bill would require the U.S. Department of Justice to focus on communities that have been hit hardest by the identity theft crisis.

"The federal government must become more vigilant in stopping tax-related identity theft," Wasserman Schultz said.

She said she will push for tougher sentences — a minimum two-year prison sentence for each tax return identity theft conviction instead of the current up-to-two-year term.

"That would help deter fraud," Wasserman Schultz added. Right now, "it is a low-risk crime" that costs American taxpayers approximately $5.8 billion last year in fraudulent tax refunds.

State, federal and local law enforcement officials agree that tax return identity theft is running rampant nationwide.

“Two-hundred-and-sixty-two thousand fraudulent tax returns and $1.4 billion in losses were prevented nationwide by the Internal Revenue Service in 2011,” IRS spokesman Mike Dobinski told KSL. “So far, 215,000 fraudulent returns accounting for over $1.15 billion in refunds have been prevented this year.”

In 2010, the IRS saw fewer than 50,000 falsified returns accounting for $247 million in fraudulent refunds.

Nearly a quarter of Americans filing complaints to the Federal Trade Commission about identity theft last year indicated they had fallen victim to tax or wage fraud. That number has more than doubled since 2008 when only 12.3 percent of identity theft complaints were related to tax or wage fraud.

In 2011, the FTC received nearly 280,000 complaints about identity theft, an increase of more than 10 percent from the previous year.

About 12,400 of these consumer complaints came from Utahns, the highest for the state since 2008, according to the FTC's annual reports. Almost 36% of them were wage or tax related.

Falsified tax returns are especially easy for scammers to manipulate as the IRS does not authenticate tax returns or W-2 forms. All an identity thief needs is someone’s name and Social Security number, a new address and a bank account or debit card number.

In some cases, identity thieves make up names and Social Security numbers fully aware that the IRS does not match up the information prior to issuing a refund.

As a result of online filing and rapid refunds, thieves are able to have fraudulent refunds automatically deposited to prepaid credit or debit cards in less than two weeks.

“Privacy is up for grabs these days from every direction,” Florida State Representative Denise Grimsley (R-Sebring), Chairman of the House Appropriations Committee, told KSL. “Frauds are bilking citizens and the system of millions because so much of our personal information is exposed.”

According to the Federal Bureau of Investigation, the state of Florida ranks No. 1 in the nation for identity theft complaints with 130,449 filed — or 694 per 100,000 of the population.

Dobinski, the IRS spokesman, did acknowledge that the Internal Revenue Service does not routinely match taxpayer names with Social Security numbers. "It all starts with the Social Security number," Dobinski concluded.

Another bill now before Congress that Wasserman Schultz is co-sponsoring would remove Social Security numbers from Medicare cards — a change many millions of seniors nationwide have been seeking to combat identity theft.

"Identity theft can be frustrating for victims,” Dobinski said. "There are a number of things the IRS is doing to detect and deter fraud. We've increased the use of screening and filtering."

Victims of identity theft or taxpayers who believe they are at risk of identity theft as a result of lost or stolen personal information should contact the IRS Identity Protection Specialized Unit at 800-908-4490. Taxpayers will be required to complete an IRS Identity Theft Affidavit — Form 14039 — to initiate the investigation process.

Taxpayers may also wish to consult the Taxpayer Guide to Identity Theft or the IRS Identity Theft Protection page in an effort to learn more about tax return identity theft.

"Victim's of identity theft in Utah should immediately contact the Attorney General’s office to file a report through IRIS," says Richard Hamp, who prosecutes identity theft for the Utah Attorney General's Office. "The Identity Theft Reporting Information System is an official State of Utah law enforcement web site from which claims are reported to local, state and federal law enforcement agencies."

Bill Lewis is the principal of William E. Lewis Jr. & Associates and host of The Credit Report with Bill Lewis — a daily forum for business and financial news, politics, economic trends and issues on AM 740 WSBR in south Florida.