The arrival of the tax filing deadline Wednesday comes as police departments deal with a surge in the number of Maine residents victimized by identify theft and tax return fraud.
Police in Greater Portland have reported dozens of cases so far of residents filing their taxes and then receiving a notice from the IRS that someone already has filed using their Social Security number.
“It has really accelerated this year,” said Falmouth police Lt. John Kilbride. “We’ve probably had two dozen incidents to date so far where their identity has been compromised through the tax return, and I expect we’re going to get a lot more as people who were holding out for the last moment file their returns.”
Tax return fraud costs the federal government billions of dollars and costs Americans countless hours of aggravation. The IRS says authentic taxpayers will be made whole, but the process requires multiple forms and can take four months.
“It’s frustrating. It’s a lengthy process. It’s unfortunate,” said Mark Hanson, regional spokesman for the IRS. “Obviously, the agency recognizes identity theft is a serious problem, one of our ‘dirty dozen’ tax thefts. From an IRS standpoint, what we need to focus on right now is stopping the fraudulent refunds … and resolving the situations where taxpayers have been victims.”
The primary tax scam, police say, is someone using a taxpayer’s name, birth date and Social Security number to file a fake return. The identity thief then has a refund – often inflated with fake income and withholding statements – directly deposited into a bank account. By the time the IRS checks the return against an employer’s reported wages, the refund is long gone.
Another recent scam involves people posing as IRS agents claiming that a taxpayer owes money and must pay it using prepaid debit cards or wire transfers. The scammers use computer software so the call appears to come from the IRS. If the taxpayer hangs up, another call comes in from someone posing as a local police officer who threatens arrest if they don’t comply.
MORE THAN 434,000 AMERICANS TARGETED
Sen. Susan Collins, R-Maine, planned to host a hearing about the scam Wednesday before the Senate’s Special Committee on Aging. Collins cited a federal report showing that more than 434,000 Americans have been targeted by scammers impersonating IRS officials, and thousands were defrauded out of millions of dollars. Many of the calls originate in India, Collins said.
One of those testifying is Auburn Detective Jason Moore, who investigated a similar scam and was able to intercede and recoup some of the victim’s money.
Last year at tax time, police received a flurry of fraudulent tax return complaints, many of them from people in the medical profession. Authorities suspected they were connected to a data breach involving Maine Medical Center employees.
This year, people from a broad range of professions seem to be affected, said Cape Elizabeth police Capt. Brent Sinclair. The town had received 21 complaints through Tuesday from people reporting a fraudulent return filed in their name. Typically, they submitted their tax return and received a notice from the IRS saying one already had been submitted.
“There’s some speculation among some of the victims that there may have been a connection to that Anthem breach,” Sinclair said, referring to the theft, announced in February, of personal data of millions of current and former customers and employees of the Indianapolis-based health insurer.
Portland police said about 40 people had reported fraudulent tax return filings in their name, about the same as last year.
In Cumberland, police said the number of people reporting the problem is rising.
“I would say this is a crime that is on the increase,” Cumberland Police Chief Joseph Charron said. Typically, victims have no idea how their personally identifying information was obtained.
‘IT JUST MAKES LIFE MISERABLE’
Those affected may not be out money, but it’s a lousy experience nevertheless, Charron said.
“They’re beside themselves initially I’m sure,” he said. “The IRS will accept their return, but they have to jump through a bunch of hoops and fill out a bunch of forms. It just makes life miserable, not to mention the billions of dollars that are lost.”
There is little local police can do to investigate the crime. Because the fake tax returns are filed electronically and the money deposited directly into a remote bank account, there is no local crime to investigate.
“There’s really nothing we can do. The feds are going to be the ones doing the investigation,” Cape Elizabeth’s Sinclair said. However, the IRS requires the taxpayer to file an impersonation scam report with the local police department. “We’ve printed out a bunch of them and just hand those out,” he said.
Part of the problem has been efforts to make filing and receiving a tax refund easier. Also, there has been pressure from Congress to get returns back to people as quickly as possible, and resistance from employers to submitting withholding and payroll information earlier, according to police and identity theft experts.
Hanson, from the IRS, said the agency does not comment on pending legislation or potential policy changes to address the problem. However, the IRS has taken some steps toward reducing the scope of the problem.
IRS EFFORTS PARTIALLY SUCCESSFUL
One pilot program assigns taxpayers a pin number that must be filed with the person’s tax return. That unique six-digit number wouldn’t be available in the typical data breach of a department store or health insurer. Currently, that safeguard is available only in a few states, but people who have had their identity stolen for a fraudulent tax return can request a pin, the agency said.
The IRS also employs computer data filters that have helped stop 19 million suspicious returns and prevented disbursement of more than $63 billion in fraudulent refunds over the past three years. Last fiscal year, the IRS launched 1,063 identity theft-related investigations resulting in 748 people being sentenced, a 75 percent increase over the previous year, the agency said. Almost 90 percent of those people went to jail, with the average prison sentence three and a half years.
“We’ve had more success stopping it, but it continues to be a problem,” Hanson said.
In response to the increase in identity theft and fraud, the AARP launched its Fraud Watch Network. Jane Margesson, spokeswoman for the organization in Maine, said the program is available to anyone, regardless of age.
“Unfortunately, the scams are very difficult to actually bring to an end. These people move around a lot, are hard to catch and they’re very good at what they do and they can be very intimidating,” Margesson said. The network helps inform people about what the latest scams are, hopefully before they are victimized, she said.
“The more we all know and more we all stay aware, the more we can help (keep) people from falling victims to these crimes,” she said.
Kilbride said Falmouth police have continued to receive three or four reports a week from people who discovered that fraudulent returns were filed in their name.
“It’s not going to settle down till the end,” he said, adding that one of the best safeguards against the problem is getting the tax return completed early.
“The longer they sit on it, the more opportunity the subject has to be victimized,” he said. “I’m sure they tried me, but I did mine right out of the gates.”
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