It’s an old scam, but it’s gained new life this year: Someone may be filing your tax return for you and running off with your refund.
Hundreds of metro-east families have reported being hit with this form of identity theft this year. Still more may emerge as taxpayers file at the last minute or file for extensions, only to find out someone already has filed a fraudulent return using their Social Security number.
Last year, the IRS intercepted 19 million “suspicious returns” involving $63 billion in tax refunds. That led to a policy change for 2015: limiting bank accounts to only one direct deposit or three prepaid debit cards. However, reports of fraudulent returns have escalated this year.
While the IRS does not have statistics on the number of metro-east cases so far this year, local police departments are fielding them individually. Here are some of the tallies as of last week:
• Collinsville: at least 50 cases reported.
• O’Fallon: 83 cases.
• East St. Louis: 9 cases.
• Shiloh: 52 cases.
• Fairview Heights: 42 cases.
• Belleville: 81 cases.
If the IRS identifies a tax return as being suspicious, they will send a letter coded 5071C to the taxpayer. If you receive such a letter, and it is about your valid tax return, you can go to idverify.irs.gov or call the toll-free phone number on the letter to verify your identify and expedite your return.
Karen Whitaker, of Edwardsville, got a letter from the IRS, informing her that someone had filed a “suspicious” return under her Social Security number. That’s how she found out that someone had taken her Social Security number and filed a fake return.
“It took three hours to get a live person on the phone,” Whitaker said. “The website they provided in the letter didn’t work.”
In addition, about a week later her debit card had a $3 charge in Mexico. “I wish it was because I was in Mexico, but I wasn’t,” Whitaker said. “I had to cancel that card. What a hassle this all is.”
In some cases, people apply for temporary ATM cards and have the refund sent to that account.
In many cases, people who have been the victim of identity theft find out when they try to file their tax returns electronically, only to learn those returns have been rejected.
The Koppenhofer family found out ahead of the IRS. They tried to file their return a week ago via TurboTax, and were warned that one of their Social Security numbers had already been used to file a return.
Mary Koppenhofer said TurboTax was able to determine it was her husband Chris’ number, and advised her on the steps she needed to take to protect their credit and finances. First step: call the police.
“Dupo Police sent out an officer who told us it was the 15th report he had personally taken, and he believed there had been at least 50 reports overall,” Koppenhofer said. “That’s just in Dupo.”
Koppenhofer said they have been watching their accounts and have not seen other indications of fraud. But they were advised that their tax refund would be significantly delayed because of the fraud.
“We don’t depend on that money because we never know if we’re going to get a refund,” Koppenhofer said. They had planned to use the money to help her daughter buy a car, but instead they will buy it with help from family members until the refund comes in, she said.
It is not uncommon for the IRS to warn people their refunds could be delayed by six months or more, only to have it show up a few weeks later.
Brian Phelps of Granite City went to H&R Block on Thursday to get his taxes done. On Friday, H&R Block advised him that the IRS had rejected his return because someone else had already filed with his number.
“I was pretty low on cash, and I was hoping to have (the refund) to lighten the burden,” he said. “I just get along week by week.”
Instead, he said, he’s following a check list of forms to fill out and reports to file to protect his identity – and he knows he’s not alone. “They told me it’s been a real problem this year,” he said.
Koppenhofer said she wasn’t too surprised because she’s heard so many people saying they were hit with this scam. But she believes the instant-rebate debit cards are a problem and should be discontinued. “That’s the only way this will stop,” she said. “Knowing how sophisticated computer crime is, I see that as an avenue that will continue … they’re not going to stop.”
Katie Heaton, of Collinsville, hadn’t filed early because she expected to owe money, as she had for many years. But then she got the IRS letter requesting verification, because it had received a joint return for her and a Leonard Smith. Problem: Heaton had never heard of Leonard Smith.
“I was on the phone with the IRS for two hours proving my identity,” she said. Heaton said she has no idea how anyone could have gotten her information; she is very careful with her Social Security number and suspects it was a breach elsewhere that exposed her identity. But the return with “Leonard Smith” called for a refund from a 1040-EZ form, and she hadn’t used an EZ or gotten a refund in years.
Heaton said when she filed her police report, the Collinsville Police Department told her they were getting three or four reports a day. “A couple of years ago, they said it would have been one person a month,” she said.
Then Heaton got a bill from TurboTax. It seems that the false return had used TurboTax software and told them to take the fee out of the return. But since the IRS refused it, they billed Heaton for $82. “That was another hour on the phone with TurboTax,” Heaton said, although the tax preparation software company agreed to negate the bill.
The kicker? After all that, Heaton is actually getting a refund this year. It’s the first year filing with a child in college, and those extra deductions will give her a return for the first time in many years. But it will take at least six months for the IRS to wade through the identity theft before issuing her refund, Heaton said.
IRS spokesman Michael Devine said the agency initiated 1,063 identity theft investigations last year, culminating in 438 sentencings – a 75 percent increase from the year before, with 88 percent resulting in jail time. Statistics were not available for this year so far.
The IRS clarifies that it can only handle reports of identity theft when it involves tax fraud; issues with credit cards and debit cards, false debts on your credit report and other issues of identity theft cannot be handled by the IRS. However, the Federal Trade Commission handles reports of many different kinds of fraud, including identity theft.