Tax return fraud on the rise

Every year millions of U.S. citizens trust the IRS with all of their sensitive financial information when they file their tax returns. Unfortunately there are those out there who are looking to capitalize on the tax refund process by tricking unsuspecting citizens into releasing their private data.

Tax return fraud on the rise

The commissioner of the Internal Revenue Service told Congress that that the IRS has experienced a “significant increase in problems tied to the theft of taxpayer identities.”

In 2008, there were 51,702 incidents of fraud. In 2009 the IRS reported 169,087 cases of fraud, and in 2010, that number jumped to 245,000 cases. This is obviously becoming a major headache for the IRS. In fact the amount of cases has increased five fold in the last 5 years.

Commissioner Douglas Shulman also told the government accountability office that it is incredibly difficult to screen every return for fraud because it would cause massive delays, but Shulman has also said that the IRS obviously needs to do better.

How the fraud is taking place

Scam artists are targeting low income families, the elderly, and church congregations mainly, but they will lure in anyone they can. The unsuspecting victim files their tax return through a 3rd party after being told they are eligible for tax credits, rebates, and refunds that they are not really eligible for.

After you have left your personal information, the third party then steals your SSN and files a fake return with a different mailing address. After a few days have passed, they will send your real return to the IRS for processing as well.

After a few weeks of waiting, you will receive a letter from the IRS. You open it thinking it is your refund check. The only problem is that it is not a check at all. What you have just received is a letter saying that your tax return was rejected because someone with your taxpayer I.D. has already received the refund. Yes, that friendly, well-spoken person you hired to file your taxes has stolen your identity.

What to lookout for

If you are told that you are eligible to receive money based on withheld Social Security benefits, that a treasury form 1080 can be used to enable a payout from the IRS by transferring funds from Social Security, or you are offered free money without any documentation, you should find another tax service immediately. Many have fallen for the scams listed above.

Unfortunately for some it is already too late and they are now left to pick up the pieces of their now bad name. One unlucky tax payer fell victim to these scams a three years ago and she is still trying to clear her name.

The IRS seems unwilling to help her and are offering very little assistance when it comes to clearing her name. However, testimony from three other victims at a congressional subcommittee prompted the IRS to issue an apology, and an offer to help put things right. You, on the other hand, might not be so lucky.

What to do if you are a victim

If you think you have fallen for one of these scams there are some things that you should do. First of all you should call the IRS’s Identity Protection Specialized Unit at 1-800-908-4490.

Secondly, check all of your credit reports. You can go to to get your free credit reports from all 3 credit reporting agencies. This site was setup by Equifax, Experian, and TransUnion so that all U.S citizens can get free access to their credit reports. If you see anything unusual on your credit report, call the reporting agencies immediately.

Last but not least, be really careful who you share your sensitive data with. Only use accredited companies to prepare your tax returns because it can, and will, take years to clear your good name if anything were to happen.

This guest post is by Brett Day,  from Moore, Oklahoma. He is a featured contributor for Y! Contributor Network in Technology. He has a huge interest in the world of technology, home theater, and video games. Brett loves writing and sharing his knowledge on all of these subjects.