Tax season is stressful and tedious. Honestly, there are only two things that really keep U.S. taxpayers filling out the mountains of numbered forms and itemizing receipts each year. First: the fear of an audit. Second: the promise of a nice tax refund every April.

Those refunds are so nice, in fact, that scammers in Bulgaria, Lithuania, and Ireland are stealing peoples’ identities to cash in on refunds. According to a report issued earlier this month, the IRS sent out checks for a total of nearly $4 billion in fraudulent refunds last year.

That’s “billion.” With a “B.” So how did the IRS send nearly $4 billion dollars to identity thieves? Let’s review the facts of this bizarre incident.


Identity Thieves Get the Jump On Legitimate Taxpayers

Identity thieves file fake tax returns using stolen Social Security Numbers, often from people who don’t have to file tax returns, like children, the elderly, or the deceased. Reports the New York Post:

“Last year, the IRS issued 1.1 million refunds to people using stolen Social Security numbers, the inspector general’s report said. Those refunds totaled $3.6 billion.

Additionally, the IRS issued 141,000 refunds last year to people using stolen Taxpayer Identification Numbers, which are typically used by foreign nationals who earn money in the U.S. Those refunds totaled $385 million, the report said.”

Color Photo of a calculator, pen, and pocket calendar

Identity thieves get fraudulent tax refunds by filing well before the deadline.

Because the IRS prides itself on issuing refunds quickly, it often sends out refund checks before income-verification documents arrive from employers.

It’s a lucrative scheme, if not a subtle one: last year, the IRS sent 655 refunds to a single address in Lithuania, and another 343 to one address in Shanghai.

It’s not a purely international scam, either: lots of undeserved refund checks went to Miami, Chicago, Detroit, and Houston.

Resolution Possible, But Slow

Fortunately for those who have had their identities stolen by these tax refund hijackers, the IRS is pretty good at identifying victims of identity theft during tax season. Unfortunately, though, the number of people trying schemes like this is on the rise:

“Through June, the IRS identified 1.6 million victims who had their identities stolen during this year’s tax filing season, the report said. That compares with 1.2 million victims in 2012.”

Still, even as identity thieves get more brazen, the IRS has been getting more aggressive. They successfully resolved 565,000 cases of identity theft this year – three times as many as last year.

That’s a step in the right direction, even if it’s not close to a 100% success rate. And those resolutions don’t come nearly as quickly as the fraudulent refund checks.

For identity theft cases closed in 2011 and 2012, it took the better part of a whole year to get the case resolved, and a real refund check issued. The average resolution time for 2013 has been 120 days, which is still 120 days more than the average person wants to spend dealing with the IRS and identity theft.


One More Reason to Protect Your Identity

If you haven’t already, make sure to check out some of our tips for avoiding identity theft. And since this scheme targets children and the elderly, make sure to protect your children and elderly relatives as well.


See Also

What Should You Do if Your Identity is Stolen? 3 Steps You Need to Take Right Now
IRS Accidentally Leaks Thousands of Social Security Numbers to the Public
Over 40,000 Arizona Patients at Risk of Credit Card Fraud and Identity Theft

About The Author

Christina Newhall is a freelance writer, editor and perpetual learner. She resides in Los Angeles, and enjoys educational podcasts, ambitious baking projects, and sci-fi TV.

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