The tax filing deadline came and went this week, and many taxpayers in Florida and around the country eagerly await their refund checks, if they have not received them already. But some taxpayers will unfortunately have trouble receiving that refund. Earlier this month, we noted the efforts of Florida Senator Bill Nelson to fight the rise in taxpayer identity theft, which has become an increasing problem in our state.
The confluence of a number of factors is responsible for the alarming rise in identity theft and associated tax fraud, say government agencies. The Internal Revenue Service must process approximately 145 million tax returns each year. In addition, 77 percent of taxpayers now use the faster electronic filing method. The U.S. Government Accountability Office discovered that, due to this high return volume, the IRS only checks the accuracy of a taxpayer's return against employer-provided W-2 forms after the filing deadline. By that time, many refund checks are out the door and traveling to identity thieves.
Solutions are gradually coming into effect. National Taxpayer Advocate Nina Olson suggested that eliminating the electronic filing option could stem the rising tide of identity theft. But even she admitted this is likely an unworkable solution. Instead, the IRS has created new software programs designed to catch questionable returns and has given personal identification numbers to victims of identity theft.
According to the IRS, these and other anti-tax fraud measures have stopped over $2 billion in fraudulently requested refunds during the past two years. But these numbers can be little consolation to those who must fight the IRS for their rightful refund. One Florida man who had his identity stolen is still waiting for his refund from the 2010 tax year.
Taxpayers should do everything possible to protect their identities, but because tax identity theft only requires a person's name, date of birth and Social Security number, some may still have their identities stolen. They may be subject to additional IRS scrutiny, but an experienced tax law attorney can help them in their dealings with the IRS.
Source: The Miami Herald, "Tax fraud by identity theft a growing problem with no easy fix," Daniel Chang, April 16, 2012.