IRS FRAUD

When a thief steals your ID, and your IRS refund

 

A Miami Shores couple endured the triple whammy of ID theft, tax fraud and IRS red tape in a struggle to recover an $8,000 refund.

 

Scammers are exploiting a weakness in the IRS electronic filing system, because the agency does not match filers’ tax returns to W-2 income forms filed by employers until months after the filing season ends in April.
Scammers are exploiting a weakness in the IRS electronic filing system, because the agency does not match filers’ tax returns to W-2 income forms filed by employers until months after the filing season ends in April.
Detroit Free Press / MCT

More information

To contact the IRS about a possible tax-fraud complaint, go to the agency’s website, www.irs.gov and click on “Where’s My Refund?” The hotline to reach an IRS customer service representative is 800-829-0582.


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jweaver@MiamiHerald.com

Without a hitch, Miami natives Ed and Kelley Brill had filed their joint income-tax returns from the same home address for 14 years.

But this year, after obtaining an extension, the Miami Shores couple were shocked to learn that the Internal Revenue Service had rejected their electronically filed return. It turned out that a thief had stolen Kelley’s identity, Social Security number and employer’s name, then filed a falsified refund claim — beating the Brills to the punch.

Now, the parents of three school-age children — who still have no idea how they were victimized — must wait six to 12 months to get their $7,918 refund. Like hundreds of thousands of other Americans, the Brills are enduring a frustrating triple whammy: ID theft, tax fraud and IRS red tape.

“What gets me is the taxpayer who was ripped off and did nothing wrong has to prove himself to the IRS,” said Ed Brill, 50, a mortgage banker whose wife is a schoolteacher.

They learned from an IRS representative in November that Kelley’s ID was stolen and used for the fraudulent tax refund, but were told little else. “The IRS never bothered verifying anything filed by the crook who committed the crime,” said Brill. “I want to be afforded the same courtesy and efficiency that the crook was afforded by the IRS.”

The combustible issues of identity theft and tax fraud in the electronic age have forced the IRS to come up with smarter ways to detect phony refund claims, match employee-employer wage statements and handle victims’ refund problems.

IRS Commissioner Douglas Shulman has focused not only on the viral identity-theft problem, but also on potential solutions such as “real-time” matching of W-2 income statements before tax refunds are issued. Starting Thursday, the agency plans a series of public meetings with consumer groups, accountants, employers and others.

Here’s the crux of the challenge: Scammers are exploiting a weakness in the IRS electronic filing system, because the agency does not match filers’ tax returns to W-2 income forms filed by employers until months after the filing season ends in April.

That means the IRS is not scrutinizing fabricated documents before it issues refunds to thieves — refunds that are loaded onto debit cards that can be used in retail stores, supermarkets and banks.

But fixing the costly problem will require the IRS to modernize its processing system and set new rules mandating that employers file workers’ income statements earlier in the year.

Jose Marrero, a former IRS special agent in charge of the agency’s South Florida criminal division, said part of the problem is that Congress has pressured the agency to process returns faster, so taxpayers can receive their returns more quickly.

But that has meant the IRS has less time to review claims for accuracy.

“There is a real conflict that the IRS has to deal with,” said Marrero, a partner with MRW Consulting Group in Fort Lauderdale. “They are hamstrung by some of the things that Congress wants them to do or allows them to do.”

In the meantime, the IRS has designed software filters to flag false returns before they are processed and refunds issued — including screens that spot certain changes in a taxpayer’s filing, such as a different address or marital status.

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