Tax Refund Stolen by ID Thieves

A Burlington man had his tax refund stolen by an identity thief.

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    REUTERS
    Some experts say the IRS can’t keep up with new technology used by hackers and identity thieves and the current system is dangerously behind.

    Like many Americans, Andy Armas went to file his taxes well before the April 17 deadline this year. However, what he found was a very unpleasant surprise. The Internal Revenue Service rejected his filing and told him that “he” had already filed.

    “This year, our accountant filed our taxes. Two days later after we e-filed our taxes, she called back and said there was a problem with our return. I go, ‘What happened?’” Armas recalled. “She says, 'Somebody else had already filed. The IRS sent it back, saying someone else has filed your return with your name and social security number.'"

    Armas and his wife Eileen – who works for NBC Connecticut – were shocked. They dutifully file their taxes jointly every year, well ahead of the deadline. It was Andy’s social security number that had been stolen. Someone had used it, along with his full name and filed a federal return. The individual cashed in on his $2,000 refund. 

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    He immediately called the Internal Revenue Service and learned that the bogus return only had his  basic information correct. Everything else was wrong, yet still accepted by the IRS.

    “You'd think the IRS, which prides itself on scrutiny, you would think somebody for 10 years who submitted tax returns with the same address, two dependents with the same spouse, all of a sudden a new form comes in, this person isn't married anymore, change of income and now he wants his tax return on a debit card. … You'd think that'd send a red flag," Armas told NBC Connecticut.

    Now, Armas must wait a year to get his refund back. The IRS has launched an investigation to verify Armas’s identity that they say will take about 12 months and require multiple forms of identification. A hold will be placed on his social security number. Only after all this will they be eligible to receive the refund he was originally due.

    When we asked the IRS about the problem of identity theft, they told us in a statement that I.D. theft is a “top priority.” IRS spokeswoman Dianne Besunder said the IRS installed new compliance filters to detect fraud as recently as last year.

    “We are committed to investigating the criminals who perpetrate I.D. theft-related tax crimes,” Besunder told us.

    "We’ve taken a multi-pronged approach in our efforts to prevent I.D. theft and fraud; provide assistance to I.D. theft victims, and prosecute I.D. thieves. We’ve put in new processes to handle tax returns and new compliance filters to detect fraud,” added Besunder.

    Yet, it seems the IRS is having a tough time fighting high-tech identity theft. Some experts say the IRS can’t keep up with new technology used by hackers and identity thieves. The current system is dangerously behind, they add.

    Professor Richard Pomp, of the University of Connecticut Law School, said the problem is both systematic and political.

    "The IRS is under enormous pressure from Congress to get refunds to people quickly. That means the IRS does not have the time to really make sure that (a) return is legitimate,” Pomp told NBC Connecticut. “They pay now and they will do the cross-referencing later. They also don't have the computer technology. The IRS is notorious for being a generation behind when it comes to computer technology."

    Armas and his wife Eileen are one of many families struck by this widening identity theft crisis.

    According to the Treasury Inspector General for Tax Administration, they were nearly 1 million fraudulent returns caused by I.D. theft last year. This translates into about $6.5 billion in fraud caught by the IRS. 

    The IRS responded to these numbers, telling NBC Connecticut that they “protected more than $1.4 billion of fraudulent refunds arising from identity theft-related fraud.”

    However,  here in Connecticut, tax payers are still hurting. Accountant Jim Barlow, the founder of Jim Barlow CPA and Company in West Hartford, said he saw an uptick in social security identity theft among his clients this tax season. He projects that with technology evolving so quickly, the situation is likely to get far worse as I.D. thieves come up with new strategies.

    "Many clients have told me that there are IRS emails going out to clients,” Barlow said. “Well, the IRS doesn't send emails, so you know those are fraudulent."

    Meanwhile, Armas has some advice for his fellow tax payers for next year.

    "I would say send your taxes in as soon as possible, send a paper copy verification.”

    If you believe you’ve been a victim of identity theft and have not been able to file your tax returns, the IRS recommends filing a I.D. theft affidavit and calling their fraud hotline at 1-800-366-4484. If you are suspicious of email phishing, email phishing@irs.gov or visit the IRS website.