IRS Focuses on Identity Theft in Fraudulent Tax Returns Part I

Tax time can be strenuous for many people. There are many things to worry about, such as which form to file, how to account for deductions and how much of a tax return will be received. One other issue that is becoming common during tax time is identity theft. The Internal Revenue Service is investigating this widespread issue that affects tax payers from every state, including New Jersey.

The primary suspects of identity theft through tax returns are tax preparers, postal employees and groups that police believe participate in illegal activities. It is reported all of these suspects have accessibility to taxpayer information that is required to use someone’s identity for fraudulent purposes. The tax preparers have direct access to the taxpayer’s personal information, the postal employee has physical access to taxpayer materials and the groups are known to send emails posing as the IRS to unsuspecting taxpayers.

The most common way the IRS detects identity theft is through tax return electronic filings. If a taxpayer received a notice from the IRS requesting the taxpayer to submit paper records, instead of electronically filing, it may be indicative that someone has used the taxpayer’s identity and already electronically filed for tax returns using the taxpayer’s information.

It is reported this type of crime is growing and the IRS is targeting taxpayer identity theft. The IRS reported in 2011 that it detected approximately $1.4 billion in falsely claimed tax returns that were filed by way of identity theft. The $1.4 billion falsely claimed through identity theft, represents 262, 000 tax returns, which illustrates that identity theft related fraud is approximately 10 percent of IRS fraud. The recognition of this type of crime has gained the attention of the Department of Justice and led to several arrests.

Source:, “Tax day horror story: Taking your money…and your identity,” Ron Scherer, April 16, 2012

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