Tax fraud has become quite the hit for scammers, increasing their tactics and capabilities to cheat the system.
The growing share of such fraud is about crooks using the identities of innocent taxpayers to steal money. If you have a home phone or an email account, these scams are hard to miss. We are inundated with phishing, spoofing, and all variety of cyberscams occurring to individuals each and everyday.
And this trend is especially worrisome now. Identity theft and other cybercrimes are blossoming just as the IRS is trying to make itself more accessible online—a confluence of events that could prove dangerous for taxpayers and catastrophic for the already-troubled agency.
The trend is clear. Each year, the IRS publishes a list of its “Dirty Dozen” tax scams. In 2011, just one involved some form of identity theft. This year no less than one-third were phone-based or online scams. Today, about one-quarter of all IRS criminal investigations are focused on identity theft.
In mid-March, at the height of the recent filing season, the Treasury Department’s Inspector General for Tax Administration reported that it was getting as many as 12,000 complaints a week about a phone scam in which callers who claimed to be representing the IRS demanded that taxpayers purchase prepaid debit cards to pay purported tax bills. The scamsters would then get the card numbers from the victims and clean out their accounts.
But those phone-based gimmicks may be trivial compared to a new con: stolen identity refund fraud.
The game is simple: Crooks steal Social Security numbers, file returns that claim refunds, and have the refunds electronically deposited into fake bank accounts or delivered to mail drops. Not only do they steal money from the government, but they create an enormous headache for legitimate taxpayers whose IDs they have stolen.
The IRS has been warning about these scams for years, but has now set up a new team to investigate cybercrimes. The Justice Department’s Tax Division has been focusing on these cases since 2012, and has begun about 1,000 investigations and brought 725 prosecutions.
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