Michelle Singletary: Identity theft a taxing issue

Posted: January 23, 2013

IDENTITY THEFT IS a crime that's easy to dismiss. Until it happens to you.

Just imagine: You've filed your tax return and are eagerly awaiting your refund. It's money you desperately need to pay some bills or buy whatever you've been hankering for.

But then you get a notice from the IRS saying that your return has been rejected. You won't be getting a refund because it already has been claimed. You've become a victim of identity theft. Now, identity theft becomes very real. And it's getting frustratingly real for a growing number of taxpayers.

Typically, an identity thief will steal someone's personal information, including his or her Social Security number, and file a bogus return claiming a refund. This often is done early in the tax season, before most people have a chance to file their legitimate returns. "In some situations, fraudulent filings may cause us to initiate an adverse enforcement action against the innocent taxpayer until we are able to confirm that someone else has used his or her information," the IRS said in written testimony submitted to the House of Representatives.

When defrauded taxpayers aren't getting help from the IRS, they can turn to the Taxpayer Advocate Service. From 2008 to 2012, the number of tax-related identity-theft cases the service handled increased 666 percent, according to the latest report to Congress from National Taxpayer Advocate Nina Olson. In fiscal 2012, the service had 55,000 ID-theft cases, or 25 percent of its total case inventory, Olson said.

Here are just a few recent cases reported by the IRS:

* On Jan. 8, a Chicago man was sentenced to 62 months in prison for filing fraudulent returns with IDs of prisoners and dead people.

* A former member of the military got false federal refunds by targeting fellow Marines, many of whom served in his unit in Afghanistan. He stole more than 100 names, dates of birth, and Social Security numbers.

* A Memphis woman was sentenced to 262 months in prison and ordered to pay almost $700,000 in restitution to the IRS. She got some of the stolen IDs from a "warrant book" from the Memphis Police Department. She then would give the information to others, who used it to prepare and electronically file the fake returns claiming refunds.

The IRS had nearly 650,000 active cases at the end of last year, Olson wrote in her report. She was particularly perturbed that it takes the agency six months or more to resolve them and give refunds or other relief to victims.

Because it takes so long, "many victims are left exposed to identity-theft-related problems the following filing season," Olson said.

The IRS says the growth of ID-theft cases has challenged the agency. From 2011 to 2012, it doubled to 3,000 the number of employees working on them, IRS spokesman Terry Lemons said.

"We know it's frustrating to folks, but it's frustrating to us too," he said. "Across the IRS we are doing everything we can to tackle the issue and help the victims as quick as we can. We've taken aggressive steps to go after the perpetrators."

The IRS has created a special ID number to authenticate that a return belongs to a legitimate taxpayer. For filing season 2012, the agency issued an Identity Protection Personal Identification Number to about 250,000 taxpayers. For this year's filing season, the program is expanding to more than 600,000 taxpayers.

The agency has on its website (irs.gov) a section on ID theft. You can reach the IRS Identity Protection Specialized Unit at 800-908-4490.

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