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The Resource Center Identity Theft & Protection | post

More from the Front Lines in the Battle against Fraudulent Federal Tax Returns

by Joe Mason on

The IRS wants you to know that this tax season it is doing all it can to try to insure that your identity will not be used in a phony return resulting in your legitimate refund being held up.

"Identity theft in its pernicious nature threatens the IRS as an enterprise by undermining taxpayer confidence," acting IRS Commissioner Steven Miller said as the agency starts to process the avalanche of returns it is facing. "I want you to know that we understand your frustration, and we're working hard to get your cases resolved as quickly as we can."

The IRS caseload of suspected fraudulent returns soared to 449,809 in 2012, up more than 80 percent from the previous year; with the agency resolving more than 500,000 identity theft cases during the last calendar year. But the IRS has almost 300,000 other cases pending, said Miller. The IRS blocked issuance of more than $20 billion in fraudulent refunds in fiscal year 2012, up from $14 billion the year before, the agency has reported.

In response, the IRS has more than 3,000 employees working on identity theft-related issues, more than double the amount in 2011. An additional 35,000 employees have been trained to aid victims and help taxpayers recognize identity theft indicators, he said.

But National Taxpayer Advocate Nina Olson reported to Congress last month that victims typically still wait more than six months, and end up having to speak to multiple IRS employees, before their issues are resolved.

The scale of the problem faced by the IRS is shown almost weekly in reports like this.

In Miami, eleven people have been indicted for scamming as much as $34 million using the identities of nearly 7,000 people, including more than 2,700 who were dead, to file fraudulent tax returns.

"To avoid having the fraud discovered, the defendants negotiated the fraudulently obtained income tax refund checks at each other's businesses," prosecutors said in a statement after the eleven new defendants were charged.

U.S. Attorney for the Southern District of Florida Wifredo Ferrer said the crime of ID theft coupled with tax refund scams is the "new Medicare fraud" in South Florida. He called tax-refund fraud a "tsunami".

"While identity theft in Florida ranks highest in the United States, the identity theft rate in Miami has reached near-epidemic proportions," Ferrer said last year while forming a strike force of federal agencies and local law enforcement to combat the almost out-of-control crime.

So far, his office has charged 125 defendants accused of scamming about $126 million in phony tax refunds.

The day before announcing the new indictments, in an unrelated Miami case, three defendants were sentenced to six and seven years and ordered to pay restitution of $1.15 million for filing false income tax claims with the IRS using the stolen identities of foreign nationals.

Meanwhile, a little further north in Fort Lauderdale, a woman is facing a prison sentence of up to 351 years as the primary leader in the identity theft ring, federal prosecutors said. She is accused of heading an identity theft tax fraud scheme that netted $11 million in fraudulent federal tax refunds after filing approximately 2,000 fraudulent federal returns using stolen identities.