MINNEAPOLIS - Filing taxes over the internet has become the norm for millions of Americans and tax preparers, but the IRS says that criminals are targeting the technology.
In 2011, the IRS reports the agency stopped fraudulent electronic refunds totaling $14 billion. In 2012, the total climbed to $20 billion. The agency doubled its investigators on the problem to 3,000. There have been more than 1,000 investigations and 500 people indicted.
There have been so many tax refund thefts that the IRS has added a guide for taxpayers to avoid it.
"When I filed my tax return, I got an immediate response back electronically saying that we had already filed and there was already a refund," said Stanley Thom, a Twin Cities businessman.
In fact, his return had been filed and a refund of several thousand dollars was already paid. But the recipient was not Thom. Instead the refund was collected by cyber thieves in Florida. Thom found out he was one of the victims of a new millennium tax fraud conducted over the internet.
Thom's identity, in the form of his social security number, had been stolen. Cyber thieves need only a person's name, social security number and an address to create a fake tax return and claim a refund, which can be real or made up. No W-2 forms are needed.
"It took from April until the following April of 2012 to get my 2010 tax refund," said Thom.
He said he placed more than 30 calls to the IRS to straighten the situation out, finally turning for help to Minnesota Rep. Michele Bachmann.
Unfortunately, Thom became a victim again.
"It happened again in 2012. Two years in a row, it happened," said Thom, who added that he is not concerned about his return in 2013.
"Nope, cause I had to pay in," he laughed. "I made sure I did not get a refund."
However, setting up one's taxes to insure getting money back is not recommended by tax experts. At any rate, the tactic is no guarantee of avoiding identity theft. Brooklyn Park CPA Michael Niznik recalled the experience of a client in 2011.
"In this case, he owed anyway," said Niznik. "I was able to go on IRS, through e-services and find the return that got filed. It had nothing to do with my client other than that they had his name and social security number."
The scammers in that case, from a location in Texas, collected a $2,000 refund illegally.
The IRS warns that the problem underlines the importance of protecting one's Social Security number. The advice is to avoid carrying it in a way where it could be stolen and to avoid giving it out to businesses unless it is absolutely required.