Alert
Close

Chat retirement strategies with AARP’s Jean Setzfand today, Oct. 24th, at 2:00 p.m. ET

Highlights

Open

You and Your Town Contest-You could win an AARP RealPad

AARP Auto Buying Program

Contests and
Sweeps

$10,000 Winter Escapes Sweepstakes

Beat the cold and cozy up to a chance of winning $10,000! See official rules.

Driver Safety

Piggy bank on the road - AARP Driver Safety

Take the new AARP Smart Driver Course!

AARP Books

Visit the Money Section

Enjoy titles on retirement, Social Security, and becoming debt-free.

Jobs You Might Like

most popular
articles

Viewed

Scam Alert

Protect Your Tax Return — and Refund — From Identity Thieves

How identity thieves take advantage of online filing

In 2011, the IRS reports, it stopped more than $1.4 billion in ID theft refunds from reaching suspected criminals and identified more than 260,000 fraudulent returns involving identity theft. That’s a huge jump from 2010, when the agency reported stopping $247 million in bogus refunds and 49,000 fraudulent returns.

In January, the IRS and the Justice Department announced a nationwide crackdown targeting 105 people in 23 states allegedly involved in identity theft and tax refund fraud. Federal investigators are also eyeing 150 money service businesses and auditing 250 check-cashing businesses that the IRS says may “knowingly or unknowingly” be facilitating refund fraud.

More recently, the IRS charged a high school student in Louisiana with tax fraud after she was found with the Social Security numbers, addresses and birthdates of 189 classmates.

A broken system?

But in its latest report to Congress,  the Taxpayer Advocate Service (TAS), an independent organization within the IRS, said that there are “over 50 gaps in IRS procedures” to adequately prevent, detect and resolve this crime.

“The system is definitely broken because the [privacy] laws on the books are designed to protect the taxpayer,” says Laura McElroy of the Tampa Police Department, which is playing a lead role in police efforts to combat tax ID theft. “But with the advent of e-filing, those laws now protect the criminals. As we’re investigating, the hands of the IRS are tied because it can’t provide us with taxpayer information.”

Tampa police began a six-month investigation after noticing that the illicit drug trade was waning. Traffic stops of known or suspected dealers were turning up not crack cocaine but "massive amounts" of preloaded debit cards, ledgers and laptop computers used to e-file fraudulent returns.

Investigators eventually found that identity theft instructors had been teaching weekly classes to up to 100 people, some of them drug dealers, on how to steal identities.

“Criminals find insider ‘moles’ who work at a corporation,” says McElroy. “For $200, they can buy the names, SSNs and birthdates of 10 victims from moles who can, and do, work at places that cater to an aging population, such as a medical facility.”

A sting by Tampa police, the U.S. Postal Inspection Service and other agencies brought the arrest of 49 alleged tax-related identity thieves. In addition, the USPIS intercepted some $100 million in mailed bogus tax refunds before they reached scammers.

Finding victims, living or dead

In this type of identity theft, anyone is at risk. But the dead are special targets – with help from Uncle Sam. The Social Security Death Master File, available online, is another way that crooks can get everything needed for a fraudulent e-filed tax return.

Consider the case of Craig Steven Jarrell, who died unexpectedly at age 49 on Jan. 2, 2011. Two months later, his grief-stricken mother – AARP member Leah White, 70 – tried to e-file his 2010 return. “But it was rejected at the IRS website,” she says.

The reason: On Feb. 1 – just a few weeks after Jarrell’s obituary was published online – a scammer in Florida filed a fraudulent tax return under his identity. About a week later, a $1,500 refund for Jarrell was direct-deposited into a bank account in Boca Raton.

“My son lived here in Michigan and never even visited Florida, but a deposit was made into a bank account there in just a few days, no questions asked,” White told Scam Alert. “But even after the IRS confirmed the fraud, I still had to provide his birth certificate, death certificate and go through all kinds of rigamarole to finally get his refund check.”

Jarrell’s actual amount of $432 finally reached her in December.

In all likelihood, the Florida scammer might have happened upon Jarrell’s obit and then gleaned his personal data from the SSA’s Master Death File.

You may also like: Tips for taxpayers who owe money to the IRS.

Sid Kirchheimer writes about scams and consumer issues.

Published February 6, 2012

Topic Alerts

You can get weekly email alerts on the topics below. Just click “Follow.”

Manage Alerts

Processing

Please wait...

progress bar, please wait

Tell Us WhatYou Think

Please leave your comment below.

The Cheap Life

Jeff Yeager Cheap Life Ultimate Cheapskate AARP YouTube web series save money

Catch the latest episode of The Cheap Life starring Jeff Yeager, AARP's Ultimate Cheapskate. Watch

Discounts & Benefits

From companies that meet the high standards of service and quality set by AARP.

Life insurance: you are covered rain or shine

Exclusive annuities for members from AARP Lifetime Income Program from New York Life.

AARP Credit card from Chase

Members can get cash back rewards on purchases with the AARP® Credit Card from Chase.

Homeowners Insurance
Member Benefits

Join or renew today! AARP members receive exclusive member benefits & affect social change.

Rewards for Good

Your Points Balance:

Learn More

Earn points for completing free online activities designed to enrich your life.

Find more ways to earn points

Redeem your points to save on merchandise, travel, and more.

Find more ways to redeem points