Despite warnings from the Internal Revenue Service and state Department of Revenue, scammers are running rampant and tax officials are working overtime to stop tax refunds from ending up in the wrong hands.
Connecticut DRS officials say they have taken almost 11,000 phone calls reporting fraud or identity theft since this tax season began.
"So whereas as year ago it was probably in the $3-5 million range, this year it is well over $10 million already," said DRS Commissioner Kevin Sullivan, referring to the amount of refund money being held or flagged because of fraud.
In fact, because tax refund scams are so popular, some people are even second-guessing letters from the real IRS, like the one Bethel resident Kathy Malatesta says she received.
“I actually called our accountant in New Jersey and he said, 'Yes, you are not the only client I have who has received this letter. We think it’s fraudulent,'" said Malatesta.
The letter, which looks legitimate, asked Malatesta to verify personal information that she worried could be used steal her identity.
It turns out the letter was authentic. For some unknown reason, Malatesta’s tax refund was flagged.
While getting flagged by the IRS is disturbing, it’s not as alarming as finding out someone has actually stolen your identity and your tax refund. It happened to Cynthia Flanigan.
"Somebody had already filed my Connecticut state taxes using my social security number and name," said Flanigan.
Flanigan immediately filed a police report and followed instructions found in a packet of information police gave her for victims of identity theft.
"It gives you all the phone numbers for examples credit bureaus," said Flanigan.
Experts say when it comes to tax refund theft, you won’t know there’s a problem until you file.
If you find out someone’s already filed under your identity, you’ll need to contact the IRS or DRS and fill out an identity theft affidavit and a police report, to start.
But Flanigan wonders who stole her identity and how.
"I don’t know, and apparently I am not allowed to know," she explained, adding the DRS is being tight-lipped about its investigation.
"At the end of the day, if they are saying, 'Well, no one told us who did it,' there is one of two possibilities there. The person was not actually found, or secondly that person is still in the process of going to trial," Sullivan explained.
We asked Flanigan what was most frustrating about having her identity and refund stolen.
"I am concerned about my children, if this is actually going to affect them going forward," Flanigan said.
Sullivan warns that she should be concerned about her children’s identity if she thinks their information was stolen along with hers.
"Getting information about kids is really one of the things they want the most," said Sullivan. "Because, as they say, they don’t have a track record and they don’t use credit, so that is prime."
Tax experts say finding out who has stolen your tax refund and identity isn’t as important as the steps you should take when it happens. Protecting and restoring your credit should be the bigger focus.
So what can you do to salvage your identity once it’s been stolen?
- File a police report
- Contact all three major credit bureaus
- Get a credit freeze, which will make it harder for someone to open accounts in your name
- Contact your bank and credit card companies directly and let them know your identity has been stolen
- Close any accounts opened without your permission
- Monitor your credit report often to see if any accounts are being opened without your permission
To Flanigan’s surprise, the person who stole her tax refund was actually going to get back more money than she will by filing legally.
"The fraudulent people were going to get money back. I actually owe the state of Connecticut $60 dollars," Flanigan explained.
In addition to stealing tax refunds, scammers will also lie while to get a bigger refund. Tax officials say the problem will just get worse over time because it’s becoming easier to access people’s personal information and steal their identities.