Q. Every crime blotter in the Belleville News-Democrat and our local weekly has a long list of identity thefts. I’m sure many involve taxpayers who have had their identity stolen and then had their refund paid to a thief by the Internal Revenue Service. Then, the IRS has to pay the real taxpayer a refund, while he spends time and money to clear up the mess. How much money has the IRS lost through identity theft? What are they doing to stop this? Why haven’t we heard more about this and why aren’t more people outraged?
— F.D., of Mascoutah
A. Regarding your first question, believe me if I knew the answer I’d be jetting off to Washington, D.C., and demanding my six-figure salary. As recently as January, even the General Accounting Office, which serves as a public spending watchdog, threw up its hands in frustration in its most recent bulletin entitled “Identity Theft and Tax Fraud.”
“IRS estimated it prevented $24.2 billion in fraudulent identity theft refunds in 2013, but paid $5.8 billion later determined to be fraud,” it summarized.
But it quickly added this qualifier:
“Because of the difficulties in knowing the amount of undetected fraud, the actual amount could differ from these estimates. GAO recommends IRS improve its fraud estimates by reporting the inherent imprecision and uncertainty of estimates ...”
In other words, “your guess is as good as ours.”
There is no question the increasingly common scheme likely has milked tens of billions of dollars from the hard-earned money you and I send the IRS each year. In just the first six months of 2011, for example, an estimated 1.6 million taxpayers were affected by identity theft, a nearly 600 percent increase over the 271,000 reports in all of 2010.
It has exploded since then — and the future, sad to say, looks grim. Even back in 2012, the Treasury Department estimated that it would pay out $21 billion to thieves over the next five years. From that recent GAO report, that figure may be low unless officials can get a handle on the problem.
For its part, the IRS brags about the job it is doing to prevent even higher losses. In its most recent bulletin in January, the agency claims that from 2011 through October 2014, it stopped 19 million suspicious returns, saving legitimate taxpayers from seeing more than $63 billion go to crooks.
It also says it continues to ramp up its efforts to nab the ne’er-do-wells. Naturally, it won’t discuss particulars, but says it is increasing both the number and efficiency of the identity theft data models and software filters, which can spot the “vast majority” of fraudulent returns, according to the IRS.
In addition, the agency is bolstering its teamwork with financial institutions. In January, the IRS began limiting the number of direct deposit refunds placed into any single account or prepaid debit card to three. Additional refunds now have to be mailed directly to the taxpayer. This new practice is designed to keep fraudulent tax preparers from depositing dozens or hundreds of returns into their own account. In 2011, for example, there was one instance of 2,137 refunds issued to the same Lansing, Mich., address.
The IRS also is partnering with law enforcement agencies across the country to crack down on the problem. In 2012, the Identity Theft Clearinghouse was organized to develop and refer ID theft refund fraud schemes to criminal investigation field offices. Those already victimized and select others now can request a Personal Identification Number (PIN) to use on their returns rather than their Social Security numbers. Last year, the IRS said it had managed to cut the average wait time of 312 days to resolve identity theft cases to 120.
At the same time, the IRS says it is trying to discourage thieves by meting out swifter and harsher justice to those it can catch. In fiscal year 2014, the IRS initiated 1,063 ID theft-related investigations, resulting in 748 sentencings, as compared to 438 in fiscal year 2013. Those found guilty were jailed 87.7 percent of the time and the average sentence increased from 38 to 43 months — with a maximum of 27 years. (You can find an up-to-date list of these at www.irs.gov/uac/Civil-and-Criminal-Actions-Calendar-Year-2015.)
Still, the number of prosecutions sounds like but a drop in the bucket, and the agency says budget cuts haven’t helped. The IRS also is pressured to issue refunds as quickly as possible to keep voting constituents happy, cutting the time necessary for ID verification. So the best idea seems to be for everyone to follow certain common-sense tips and hope for the best. They include: Never carry any document with your Social Security number with you; never give out the number unless absolutely, positively necessary; check your credit reports annually; protect your computer by installing firewalls and anti-spam/virus/malware software; update all security patches; and change passwords at regular intervals.
Why aren’t people more upset? Perhaps it’s like a bad car crash: As long as people haven’t been in one, they may not be overly concerned. Besides, they may think, what can the average Joe Schmoe do besides sticking your head out the window like Howard Beale in “Network” and yelling, “I’m as mad as hell and I’m not going to take this anymore!”
Who is usually credited for starting the goldfish-eating craze in 1939 in the United States?
Answer to Thursday’s question: In 1967, a little-known 21-year-old singer cracked the Billboard country charts for the first time, taking “Dumb Blonde” to No. 27. But although she often makes fun of herself (she once said she had small feet because “nothing grows in the shade”), Dolly Parton has been anything but a dumb blonde. In a 56-year career that began with radio appearances when she was 13, Parton has released 106 singles, 18 of which have hit No. 1. She also successfully transitioned to mainstream pop, starred in a dozen movies, has written thousands of songs, opened the Dollywood theme park and started the Imagination Library to promote childhood literacy. She has earned 46 Grammy nominations (8 wins) and two Oscar nominations for songs written for “Nine to Five” and “Transamerica.”
Send your questions to Roger Schlueter, Belleville News-Democrat, 120 S. Illinois St., P.O. Box 427, Belleville, IL 62222-0427, firstname.lastname@example.org or call 618-239-2465.