The connection between identity theft and tax fraud has only grown stronger as identity thieves have become bolder in recent years. Not satisfied with taking money from the bank accounts of unsuspecting individuals, identity thieves have turned their sights to defrauding the U.S. federal government. The Internal Revenue said criminal investigations of identity theft jumped 66 percent in 2013 compared to the previous year, reaching 1,492, The Associated Press reported.
IRS Commissioner John Koskinen, who was recently confirmed by the Senate in late December, announced at his introductory news conference on Jan. 6 that identity theft is a main priority.
"The people working on that are confident that while it's a growth industry for the last two or three years that it's getting under control," Koskinen said, according to the AP. "I would stress that it's an area that has everybody's attention."
Challenges the IRS Faces in Combating Identity Theft
But some consumers and other government agencies might be wondering whether the IRS is doing enough to address identity theft and the impact it has on taxpayers. Identity theft has been a "growing epidemic," according to J. Russell George, chief of the Treasury Inspector General for Tax Administration (TIGTA). During the first six months of 2013, an estimated 1.6 million Americans reported they were victims of crimes surrounding identity theft and tax fraud, TIGTA said in a report.
The numbers for 2013 showed incidents of identity theft increased, with TIGTA reporting 400,000 more victims compared to 2012. Seeing this upward trend in identity theft-related crimes, TIGTA said the IRS must ramp up its efforts to identify potential fraud in tax filings and speed up aid to victims.
"The constantly evolving tactics used by scammers to commit identity theft continues to be one of the biggest challenges facing the IRS," the TIGTA said in a statement.
In their scams, identity thieves often attempt to steal consumers' Social Security numbers and file for tax returns before victims know their identities were taken. Thieves take advantage of how the IRS quickly issues tax refunds, which may happen without the agency checking to ensure the wage and income information matches taxpayer records.
Identity Theft Scams Becoming More Sophisticated
The IRS gave out $4 billion in fraudulent tax refunds in 2012 to criminals who committed identity theft, with 655 tax refunds even sent to one address in Lithuania. In their investigations, the IRS has to deal with the challenge of determining the methods identity thieves use to perpetuate their crimes, which are growing more sophisticated.
In one recent case, identity thief Ramoth Jean tricked victims who believed they were filling out job applications into giving him their information, the Richmond Times-Dispatch reported. The identity theft scam, which would have defrauded the IRS out of more than $2 million, involved victims who usually did not file for taxes. These victims included college students and they would therefore not know their information was stolen for purposes of tax fraud. The thieves used this information to file for tax refunds with TurboTax. The firm then sent prepaid debit cards containing the refunds to addresses in the Richmond, Va., area. The IRS and law enforcement officers were able to charge Jean, after finding a debit card in his shoe, and a judge sentenced him to serve almost 10 years in prison.
"This is a disciplined organization that covered its tracks carefully," said Michael C. Moore, an assistant U.S. attorney, according to the Richmond Times-Dispatch. "This operation was an intensely disruptive scheme for the IRS and the person's whose IDs were stolen."
Criminal Investigations Rising As IRS Works to Stop Identity Theft
Out of the 1,492 criminal investigations into identity theft conducted by the IRS in 2013, 438 people were sentenced for their crimes, with prison sentences between two months to more than 26 years. While the answer to whether the IRS is doing enough to stop identity thieves before they can victimize more Americans has yet to materialize, the IRS said it will do more in the constant battle against identity theft. In its efforts to prevent identity theft, the IRS said it has more than 3,000 agents who are on the lookout for signs of fraudulent filings and has updated its computer filters to point out any red flags.
Brett Montgomery is a Fraud Operations Manager at IDentity Theft 911.