Identity Theft and Tax Fraud

Tax season is here. For some, this means a decent-sized refund and perhaps a new car or a warm beach. For some, this means a mountain of paperwork and fear of owing the government money. And still for others, this means assuming the identity of another, filing multiple tax returns, then pocketing the refunds that aren’t theirs.

The IRS loses about $5 billion each year in identity theft tax fraud, and it is still on the rise. In 2012, there were about 1.3 million fake returns. But this year, the IRS has caught over 2.6 million fake returns – and tax season has only begun. Further compounding the problem – these numbers are only what the IRS is aware of, as the IRS has missed an additional 1.5 million fake returns and $11.7 billion in refunds.

This method of tax fraud is appealing because it yields large sums of money and generally requires less work. Persons formerly convicted of violent crimes are turning to identity theft tax fraud because it is safer and the money is bigger.

So how is it done? First, the fake filers get identifying information –  name, birth date, and Social Security number. Preferred targets are people who don’t usually file taxes, or file late. In the past, filers obtained identifying information belonging to prisoners or the deceased. Nowadays, they are expanding and getting this personal data wherever they can find it – such as medical facilities, insurance companies, schools, major credit card companies, etc.

Next, the filers make up wages and withholdings, information found on the W-2 form. They will typically file electronically to avoid the need to submit the actual W-2’s or verifying documents. There have even been stories of “filing parties,” where fake filers get together and bring their laptops. They may also show others how to file fake returns, and charge for their services.

White Collar Crimes in Columbus, Ohio include identity theft (stealing identities), filing fake tax returns ( filing fraudulent returns), tax fraud, credit card fraud, as well as other charges. Pre-paid debit cards are a preferred payout as they are difficult to track.Finally, they sit back and wait for “their” refunds to arrive, either via check or pre-paid debit cards (pre-paid debit cards are the preferred method because they are easier to obtain and harder to track). If the IRS mails the refund, filers provide addresses of vacant buildings or houses, or other properties and post-office boxes they have rented for this very purpose. If the IRS electronically deposits the refund, filers will open up either one or multiple bank accounts.

But sometimes, the fake filer doesn’t beat the real taxpayer to the punch, and the IRS ends up receiving two returns, allegedly from the same taxpayer. The IRS then has to verify which one is the legitimate return, and which one is the fraudulent return. Now the actual taxpayer has to wait for a long time to receive the refund to which he is entitled. There’s a current backlog of 300,000 cases, and taxpayers are waiting sometimes up to a year have their cases resolved.

Columbus citizens were indicted in federal court for stealing identities and filing fraudulent returnsFlorida, especially Tampa, is the epicenter of the identity theft tax refund fraud. But it is hitting close to home in Ohio: Already this year in Columbus, Ohio two Columbus citizens were indicted in federal court for stealing identities and filing fraudulent returns. These individuals received over $1 million in refunds, which were sent to New York apartment mailboxes, and cashed through two companies they owned. Others have been sentenced in Dayton and Cleveland areas.

The IRS has taken steps to protect taxpayers, like hiring more investigators and increasing technology. It proposes using a national database to verify employment and wage information, and requiring that W-2’s be matched with tax returns before issuing refunds. Also, law enforcement has cracked down on investigations, and state legislatures (such as Florida) have drafted legislation to combat this problem.

Anyone who has been contacted by the IRS for an audit or any other significant question should contact an experienced lawyer right away. The IRS is not obligated to tell the subject of a criminal investigation that they are being brought in as the subject of a tax fraud investigation and will often start under the pretense of a civil investigation such as a tax audit or for another question. If the Tax Payer lies to the IRS to cover-up a criminal matter, then it can add obstruction of justice to the possible charges. Based on your set of circumstances an experienced attorney can advise you how to handle your situation with the IRS. Keep in mind that these civil investigations can quickly turn into federal criminal investigations.

Picture taken outside of the Supreme Court of Ohio in Columbus, Ohio Tax fraud is punishable by time in federal prison and the length of time depends on the amount of taxes not paid or the specific crime. As an experienced attorney I have handled numerous tax fraud cases including taking a multimillion dollar case to Federal Court. If you feel that you may be being investigated for tax fraud or other criminal or civil tax charges call my office today at (614) 309-0234 or fill out our case evaluation form.

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