Tax Identity Theft Tops IRS’ Dirty Dozen List…Again

Once again, tax identity theft topped the IRS’ 2016 list of “Dirty Dozen” tax scams,[1] beating out other colorful contenders including abusive tax shelters and frivolous tax arguments. The IRS initiated 776 identity theft related investigations during fiscal year 2015, which resulted in 774 convictions (a 99.7% success rate).[2]  The average sentence for 2015 was 38 months, with the longest sentencing being over 27 years.[3]

Generally, the scam involves theft of the victim’s social security number. The thief then files a false return using the victim’s identification credentials, and claims a substantial refund. The theft is usually discovered when the victim actually files their tax return, at which point, the IRS inquires why the taxpayer filed two returns for the same year.

The theft of American tax identity information is growing exponentially, and is perpetrated by people around the world.  “Identity theft has shifted from small-time thieves to multinational criminal enterprises that mine the Internet for personal information that is stolen, collected and sold to other criminals," said Richard Weber, Chief, IRS Criminal Investigation.

And it’s big money.

From January to November 2015, the IRS rejected or suspended the processing of 4.8 million suspicious returns.[4]  The IRS has confirmed that 1.4 million of these returns involved identity theft, which sought fraudulent refunds totaling $8 billion.[5] Additionally, through November the IRS stopped $2.9 billion worth of refunds in other types of fraud.[6]   Ostensibly, the IRS prevented $10.9 billion of fraudulent refunds in an 11-month period.

Makes one wonder how many billions of fraudulent refunds the IRS and state governments have unwittingly issued.

— By Michael S. Cooper, Esq., Barnes Law

Michael Cooper is an associate attorney with Barnes Law, and is licensed to practice law in California.

The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] https://www.irs.gov/uac/Newsroom/IRS-Wraps-Up-the-Dirty-Dozen-List-of-Tax-Scams-for-2016

[2] https://www.irs.gov/uac/Newsroom/IRSs-Top-10-Identity-Theft-Prosecutions-Criminal-  Investigation-Continues-Efforts-to-Halt-Refund-Fraud

[3] Id.

[4] FS-2016-1, January 2016:  https://www.irs.gov/uac/Newsroom/IRS,-States-and-Tax-Industry-Combat-Identity-Theft-and-Refund-Fraud-on-Many-Fronts

[5] Id.

[6] Id.