Thieves stealing Social Security numbers to file false tax returns

2012-07-22T00:10:00Z 2012-07-23T07:55:06Z Thieves stealing Social Security numbers to file false tax returnsBy JAN FALSTAD jfalstad@billingsgazette.com The Billings Gazette

The IRS rejected the federal return of Sue and Everett Lane, a retired Billings couple, when they tried to file electronically last April.

“My Social Security number had been filed on already,” Sue Lane said. “We were lucky no refund was due or our return would have been delayed one year to 18 months while the IRS straightened out which return was real.”

A cyber thief had stolen Sue Lane’s Social Security number and used it to file a phony tax return.

The Lanes had involuntarily joined the hundreds of thousands of American taxpayers who fall prey to ID theft each year. Over the past four years, the IRS has identified more than 460,000 such victims and has placed the scam at the top of its annual “Dirty Dozen” list.

IRS spokeswoman Karen Connelly in Denver declined to comment. The agency doesn’t track the numbers in individual states and can’t comment on specific cases, she said.

“We know identity theft is a frustrating, complex process for victims,” Connelly said.

The Lanes certainly have plenty of company.

“The lady at the (Billings) IRS office said I wasn’t alone, that she was seeing three to four taxpayers a day who’d had their ID stolen,” Sue Lane said.

A similar scam happened to retired Billings bus driver Nick Tillanger, who had his identity stolen a year and a half ago. In April, Internet thieves filed for a phony refund using Tillanger’s identity and it took him three weeks to get his own refund check reissued.

Then a man called Tillanger and told him he was getting a raise in his Social Security payment, but also warned him that his check might arrive a little late.

“Boy, I should thank you,” he told the caller. “I could use another $150 a month.”

Instead, the retired man’s checks got rerouted to a bank account in Ohio.

“They changed the account where the benefits were going. That’s how they stole my money,” he said.

Criminal gangs steal identities, even of dead people, from genealogy websites like Ancestry.com.

Then the thieves use legitimate software like Tax Hawk, Tax Slayer or Turbo Tax to electronically file a fake return and pocket a refund. The money can be sent to a vacant home, routed to the thief’s bank account or deposited onto a prepaid MasterCard or Visa card.

To fix the problem, the Lanes had to drop a hard copy of their tax return at the Billings IRS office, make multiple trips to the Social Security office and put a freeze on their accounts. That means every time someone tries to open a debit, credit or financial account using the stolen information, one of the three national credit reporting agencies notifies the Lanes before the application can be approved.

Protecting their money has become a major hassle, Sue Lane said.

“You stop to consider how many times you have to use your Social Security number, it’s frightening,” she said.

ID theft is an “ongoing battle” for the IRS, according to Deputy Commissioner Steven Miller who testified on March 20 before a U.S. Senate Finance subcommittee.

From January through March 9, new computer filters flagged 215,000 questionable and potentially phony tax returns and blocked $1.2 billion in refunds, according to the IRS.

By March, the agency had stopped 80 percent more questionable refunds than it did for the same period last year, Miller said.

Once an ID is stolen, the IRS can issue an extra personal identification number to help the taxpayer prevent more fraud. The agency issued more than a quarter million ID protection numbers this filing season.

ID thieves can even legally mine some critical personal data.

By law, the Social Security Administration must provide to the public a master file of dead people. This list contains Social Security numbers, names and birth and death dates on more than 85 million deceased people.

Prosecution also is increasing.

During the 12 months ending Sept. 30, 2011, the IRS sent 218 cases of taxpayer ID theft to prosecutors. Two years before, there were only 91 cases, Miller said.

The agency recommended 150 cases for prosecution in just three months ending last December.

During a nationwide sweep in January, the IRS, the U.S. Justice Department and local U.S. Attorneys’ offices arrested 105 people in 23 states, charging them with 939 criminal counts of ID theft.

“We have had great difficulty keeping pace with the number of cases, but we are determined to bring to bear new resources and streamline existing processes,” Miller told the Senate subcommittee.

While he lived in Las Vegas for six months, Tillanger volunteered his Social Security number on applications for casino club cards, and he thinks that’s where his number got stolen.

After a handful of trips to the local IRS and Social Security offices, he finally got his checks routed to his bank account again.

Like the Lanes, Tillanger had to put freezes and notification alerts on his financial identity. So far, he’s foiled attempts by someone to open fake charge accounts at Macy’s and catalog retailer Fingerhut, debit cards, and a recent attempt to open an American Express card.

“They’re really going full bore. I get a letter a month,” Tillanger said.

Copyright 2014 The Billings Gazette. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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