Tax Day! Now Comes the Great Refund Rip-Off

It's become a growing problem–the crime of "stolen identity refund fraud". Justin Gelfand, a former federal prosecutor in the Justice Department's Tax Division writes: "If the problem continues unabated, Treasury estimates the IRS will lose 21 billion in fraudulent tax refunds over the next five years."

Gelfand explains why it’s not enough for the government to just investigate and prosecute more cases: “,…the thieves stay one step ahead through the use of cutting-edge technology to mask IP addresses from which tax returns are filed, by directing stolen proceeds onto prepaid debit cards and stealing those cards from the mailboxes of strangers, and by stealing names and Social Security numbers from businesses that lack adequate security controls and firewalls.” And because criminals can “make it look like the return was filed from one IP address when it was in fact filed from another,” Gelfand says that makes it easier for innocent people, who are the victims, to get blamed for a crime they haven’t committed.

So what can be done? Here’s what Gelfand recommends: “While the IRS claims otherwise, the solution isn’t particularly complex: stop wire-transferring multiple tax refunds onto the same prepaid debit card; stop mailing hundreds of tax-refund checks to the same mailbox; stop accepting thousands of tax returns from the same IP address without looking into it; and stop paying tax refunds without actually verifying the accuracy of the information with existing IRS records.”
And he makes this point to taxpayers who may feel powerless to do anything about the problem: “If we as a society are interested in actually stopping this problem, the solution cannot only be through law enforcement. Citizens must ask the IRS why it is so easy to steal money in this way, and why the IRS is losing so much money to this crime alone.”

The Wall Street Journal, 4/14/14

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