Identity Theft and IRS Fraud at Colleges (So Fla Bus Journal)

18 Miami-Dade College students charged with stealing classmates’ identities
Nov 18, 2014, 12:40pm EST Updated Nov 18, 2014, 3:12pm EST

Brian Bandell
Senior Reporter
South Florida Business Journal

Eighteen students at Miami-Dade College were among 21 people charged with stealing the identities of students there to commit $1.9 million in tax refund fraud.
Federal authorities arrested 17 of the defendants on Tuesday, including 14 of the MDC students. More than 644 students at MDC were victimized, according to the complaints.

This brings an epidemic to new proportions. Florida has the highest rate of identity theft in the nation, and Miami has the most complaints by victims, according to the Federal Trade Commission.

"Today's takedown is further evidence of the insidious and widespread nature of stolen identity tax refund fraud," U.S. Attorney General for the Southern District of Florida Wifredo Ferrer said in a news release. "That this crime has infiltrated life at a college is alarming. As a community, we cannot permit this type of crime to negatively affect young people and their prospects while in college."
According to the complaints, most of the defendants ran the scheme through bank accounts with Higher One, a company that provides financial services to college and university students. Multiple fraudulent tax refunds were deposited into Higher One accounts. Some defendants also used these accounts to collect fraudulent social security checks.
Over 1,000 Higher One accounts were implicated in the investigation.

"Those arrested today were part of a Miami-based group who systematically hacked into numerous businesses and government institutions," George L. Piro, the FBI special agent in charge of Miami, said. " Once inside, they stole personally identifiable information from unsuspecting victims to unlawfully file tax returns and redirect Social Security payments."
The defendants are Gary Antoine, Emmanuel Avrilien, Gerrey Cherrelus, Sandy Jean-Louis, Marie Joseph, Andy Lamour, Tamica Smith, Marvin Dubuisson, Ronald Dumond, Bianca Noel, Erving Jaques Etienne, Mitsie Faustin, Caleb Fadet, Laquisa Q. Johnson, Beethoven Nelson, Farah Norelus, Smith Jean, Beatrice Simeon, Glasner Simplice, and Rutherford Willy.
Officials at Miami-Dade College said they were working closely with the U.S. Attorney's Office to resolve the matter.

"The actions of these individuals are in no way a reflection of the vast majority of the hardworking, honest students at Miami Dade College, looking to improve their lives and their families'," Miami-Dade College stated. "In fact, the situation was reportedly orchestrated by individuals not connected to the college, taking advantage of often vulnerable students. It's also important to note that what has reportedly transpired is not a result of a lack of vigilance and proactiveness on the part of the college."

Avoid Tax Return Fraud- Don't E-File (WSJ)

E-Filing and the Explosion in Tax-Return Fraud

Identity-theft cases rocketed to 1.1 million in 2011 from 51,700 in 2008. The IRS has a backlog of 650,000.

 

By JAY STARKMAN

Now that Americans finally know the tax rate they'll be paying, it's time to start thinking about the annual drudgery of filing their returns. It's also the season when identity thieves begin ripping off those returns and stealing billions in false or misdirected refunds. Tax fraud, amazingly, is now the third-largest theft of federal funds after Medicare/Medicaid and unemployment-insurance fraud.
Tax-identity theft exploded to more than 1.1 million cases in 2011 from 51,700 in 2008. The Treasury Inspector General for Tax Administration last summer reported discovering an additional 1.5 million potentially fraudulent 2011 tax refunds totaling in excess of $5.2 billion.

Why has identity theft rocketed through the Internal Revenue Service? Because American taxpayers, urged on by the IRS, have taken to filing their income-tax returns electronically and arranging for refunds to be directly deposited into bank accounts. E-filing is appealing because it provides an electronic postmark confirmation that the return was filed on time. When it is combined with direct deposit, a refund can arrive in as little as seven days. In 2012, 80% of individual returns were e-filed, fulfilling an initial goal Congress set in 1998. The result is an automated system in which the labor burden is transferred to the taxpayer.

E-filing contributes to tax complexity as the IRS demands ever more data for reporting of wage, interest and brokerage income with more tax forms. A discrepancy may result in a rejection code, a letter from the IRS Automated Underreporting Unit, or a computerized audit out of a centralized IRS office in Ogden, Utah. There's no cost to the IRS for requesting extra information when it's received electronically.
Targeting taxpayers for audit is a major factor behind the IRS's push for e-filing. E-filed returns are available for audit several months sooner than paper returns, allowing more time before the three-year statute of limitations expires. The IRS has even boasted that its e-file database is "a rich and fertile field" for selecting audits and has estimated that if its "screeners could be reallocated to performing audits, they could bring an additional $175 million annually."
Fraudulent tax returns can come in the form of tax-identity theft, refund fraud, or return-preparer fraud and are difficult to prosecute. With e-filing, evidence of fraud is difficult to find. There are no signed tax forms, envelopes or fingerprints, and e-filing promises quick refunds.
It's easy for criminals to e-file using a real name and Social Security number combined with a phony Form W-2 (wages) or fabricated Schedule C (business income). The refund can be posted to an anonymous "Green Dot" prepaid Visa or MasterCard  purchased at a drugstore. Such cards have a routing and account number suitable for direct deposit. The IRS may even correct a fraudulent return to refund the estimated taxes that the real taxpayer already remitted, as happened to one of my victimized clients.
Another form of fraud is when an unscrupulous return preparer modifies the bank-routing information on a return so the direct-deposit refund will wind up in his own bank account. He might increase the deductions so a return will show a larger refund due, with only the increase routed to his bank account. The victim will know nothing unless the IRS sends an audit notice.
Other preparers have abused the return information of former clients to file false refund returns in subsequent years. Criminals have established physical offices and websites displaying names of major tax-preparation franchises in order to gain genuine return documents and signatures from unsuspecting victims.
The IRS will replace a lost or stolen refund check. However, a stolen refund using an altered or erroneous routing number on a tax return will generally not be refunded until the bank returns the funds to the IRS. Otherwise, the taxpayer's sole recourse is a lawsuit against the return preparer.
Millions of Americans now pay the IRS via an Electronic Federal Tax Payment System debit. Unlike ordinary creditors paid electronically, the IRS is in the business of sending refunds but it doesn't compare names on bank records against its own files. So, with just the routing information from a personal check, a skilled criminal can use the electronic tax-payment system to transfer funds from a victim's bank account as an estimated-tax payment to another stolen name and Social Security number, then file a refund claim transferring the stolen funds to his own account. (This can be prevented by having your bank place an "ACH debit block" on your account.)
Fraud is a major problem for states, too. Using TurboTax, a 25-year-old woman e-filed a fraudulent 2011 Oregon return reporting wages of $3 million and claiming a $2.1 million refund—and the Oregon Department of Revenue sent her the refund. In October, a hacker stole 3.8 million unencrypted tax records from the South Carolina Department of Revenue. Georgia reports that 4% of its returns are fraudulent.
If you become a tax-identity theft victim, immediately seek a referral to the IRS Identity Protection Specialized Unit or the Taxpayer Advocate Service using Form 911. Keep in mind that it can take over a year to resolve. The IRS has a backlog of 650,000 cases.
The national taxpayer advocate has recommended that taxpayers be allowed to tell the IRS to accept their return only when filed on paper, thus preventing e-file tax-identity theft. So far the IRS has failed to allow this. Less effective methods are to request an "electronic filing PIN," available at www.irs.gov, and file Form 14039, "Identity Theft Affidavit," so that the IRS might apply additional return-screening procedures. Sadly, conventional credit-monitoring services are useless against income-tax identity theft.
In sum, e-filing helps the IRS with audit selection, costs the Treasury billions through fraud, and transfers many costs of tax administration to you.
Mr. Starkman, a practicing certified public accountant, is the author of "The Sex of a Hippopotamus: A Unique History of Taxes and Accounting" (Twinset, 2008).

A version of this article appeared January 14, 2013, on page A15 in the U.S. edition of The Wall Street Journal, with the headline: E-Filing and the Explosion in Tax-Return Fraud.

Copyright 2012 Dow Jones & Company, Inc. All Rights Reserved

 

IDENTIY FRAUD AND YOUR TAX RETURN ( from irs.gov, creditcard.com)

Taxpayer Guide to Identity Theft





What is identity theft?
Identity theft occurs when someone uses your personal information such as your name, Social Security number (SSN) or other identifying information, without your permission, to commit fraud or other crimes.

How do you know if your tax records have been affected?
Usually, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund. Generally, the identity thief will use a stolen SSN to file a forged tax return and attempt to get a fraudulent refund early in the filing season.

You may be unaware that this has happened until you file your return later in the filing season and discover that two returns have been filed using the same SSN.

Be alert to possible identity theft if you receive an IRS notice or letter that states that:

More than one tax return for you was filed,
You have a balance due, refund offset or have had collection actions taken against you for a year you did not file a tax return, or
IRS records indicate you received wages from an employer unknown to you.
What to do if your tax records were affected by identity theft?
If you receive a notice from IRS, respond immediately. If you believe someone may have used your SSN fraudulently, please notify IRS immediately by responding to the name and number printed on the notice or letter. You will need to fill out the IRS Identity Theft Affidavit, Form 14039.

For victims of identity theft who have previously been in contact with the IRS and have not achieved a resolution, please contact the IRS Identity Protection Specialized Unit, toll-free, at 1-800-908-4490.

How can you protect your tax records?
If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost/stolen purse or wallet, questionable credit card activity or credit report, etc., contact the IRS Identity Protection Specialized Unit at 1-800-908-4490.

How can you minimize the chance of becoming a victim?
Don’t carry your Social Security card or any document(s) with your SSN on it.


Don’t give a business your SSN just because they ask. Give it only when required.


Protect your financial information.


Check your credit report every 12 months.


Secure personal information in your home.


Protect your personal computers by using firewalls, anti-spam/virus software, update security patches, and change passwords for Internet accounts.


Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with


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ID Theft Tool Kit
Are you a victim of identity theft?
If you receive a notice from the IRS, please call the number on that notice.

If not, contact the IRS at
800-908-4490


Fill out the IRS Identity Theft Affidavit, Form 14039

(Please write legibly and follow the directions on the back of the form that relate to your specific circumstances.)


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Credit Bureaus
Equifax
www.equifax.com
1-800-525-6285

Experian
www.experian.com
1-888-397-3742

TransUnion
www.transunion.com
1-800-680-7289


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Other Resources

Visit the Federal Trade Commission or call the FTC toll-free identity theft helpline:
1-877-ID-THEFT
(1-877-438-4338)

Visit the Internet Crime Complaint Center (IC3) to learn more about their internet crime prevention tips


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Report Suspicious Emails
Report suspicious online or emailed phishing scams to:
phishing@irs.gov

For phishing scams by phone, fax or mail, call:
1-800-366-4484


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For More Information
IRS.gov/identitytheft
IRS.gov/phishing


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Tax ID theft skyrockets; thieves feasting on a refund bonanza

They steal your identity and go on a spree with Uncle Sam's debit card

By Susan Ladika
Published: March 26, 2012



If it can happen to a slain police officer, it can happen to anyone.

Taxpayers are having hundreds of millions -- or perhaps billions -- of dollars in tax refunds swiped by crooks who file fraudulent tax returns using the victim's Social Security number, then pocket the refunds. The victim has no idea the fraud has occurred until they try to file their own return and it bounces back.

"Nobody's immune from this crime," says Sal Augeri, a police detective in Tampa, Fla. The Tampa Bay area, along with South Florida, appear to be ground zero for the crime. But Florida is by no means alone. Just in the last week of January, the Internal Revenue Service (IRS), working with various other agencies, cracked down on suspected fraudsters in 23 states from New York to California.

The situation is so bad, Augeri testified March 20 before the U.S. Senate Subcommittee on Fiscal Responsibility and Economic Growth about what he's observed. During the hearing it was revealed one of the tax fraud victims was Tampa police officer David Curtis, who was gunned down in 2010. His widow is still struggling to get the tax refund.

"It's a growing problem that undermines confidence in the tax system," says Mark Steber, chief tax officer at Jackson Hewitt Tax Service and chairman of the IRS Electronic Tax Administration Advisory Committee.

Problem runs into billions
While it's impossible to get a handle on exactly how much money is swiped, in the Tampa Bay area alone Augeri estimates it totals up to $1 billion and could be as high as $10 billion nationwide.



HOW THE SCHEME WORKS

While the methods employed can vary, in Tampa the scheme generally works like this:
• Fraudsters find willing accomplices who have access to Social Security numbers at places such as doctor's offices and insurance companies or from credit card applications. The accomplices may steal 100 names and Social Security numbers, and get paid $1,000.
• The thieves use that information to file a fake tax return in your name -- usually beating you to the punch and filing early in the tax season.
• They take the refund -- which may come in the form of a check or prepaid debit card -- and bring it to a business they're in cahoots with.
•The business cashes the check or cashes out the debit card, gives the fraudster a cut, then keeps the rest, laundering it through the business.


At the IRS, the agency caught 262,000 fraudulent returns in 2011, seeking $1.45 billion in refunds, an agency spokesman says. That's an 81 percent increase since 2010, when the agency identified 49,000 suspicious returns, seeking $247 million in refunds. But if the fraudulent return isn't caught and slips through the system, the burden will fall on you to prove your identity, and the problem can take months to resolve, the IRS representative admits. Ultimately, you'll receive your refund, with the federal government coughing up the cash.

No one can pinpoint precisely why the crime is booming, but Steber says, "identity theft goes hand in hand with tax fraud."

A Federal Trade Commission report says that of the 1.8 million complaints it received in 2011, 15 percent involved identity theft. Of those, almost one-quarter were related to tax or wage fraud.

Criminals also are drawn to it because it's less risky than many other types of crime, Augeri says. Rather than trying to sell a kilo of cocaine for a few thousand dollars, and running the risk of being shot by other bad guys, the crooks can sit in their living room and crank out returns, netting tens of thousands or hundreds of thousands of dollars. "It's more lucrative and the punishment isn't as bad."

The 'TurboTax' scheme
On the street, it's a scheme known as "TurboTax" and evidence of the fraud can be found when police show up at all kinds of cases, Augeri says. In one recent suicide, the dead teen was found with two prepaid tax refund debit cards in his pocket.

The problem started popping up in Tampa in the second half of 2010. Police would pull over vehicles and find ledgers filled with Social Security numbers and stacks of prepaid debit cards.



The U.S. Postal Service also started noticing stacks of IRS mailings going to certain addresses, and the names on the envelopes didn't correspond with the names of the residents, Augeri says. That led postal inspectors to confiscate stacks of refund checks and debit cards.

"Over the past few years, the IRS has seen a significant increase in refund fraud schemes in general and schemes involving identity theft in particular," said Steven T. Miller, deputy commissioner for services and enforcement for the agency, in written testimony to the Senate committee. "Fighting identity theft will be an ongoing battle for the IRS and one where we cannot afford to let up. The identity theft landscape is constantly changing, as identity thieves continue to create new ways of stealing personal information and using it for their gain."

Steps to prevent tax ID fraud
While there's no way to guarantee you won't fall victim to tax return fraud, you can take steps to try to prevent it.

Rather than joining the crush of millions of Americans filing at the last minute, Steber recommends submitting your tax return early. "You effectively lock out people from trying to file your (fraudulent) return."

If you try to e-file your return and it bounces back, you'll have to file a paper return, and the IRS spokesman recommends you immediately fill out an Identity Theft Affidavit and submit it to the agency so it flags your account.

The agency has begun issuing special identification numbers called Identity Protection PINs to taxpayers whose identities are known to have been stolen. That prevents others from using their identities. As of mid-March, the agency had issued more than 250,000 such IP Pins in the 2011 filing season, says Miller.

Don't let your SSN out
If you successfully file your return, it's crucial that you keep the information stored somewhere safe. Steber says he often stops at various tax preparers' offices while traveling, and he'll invariably finds taxpayers have tossed their completed returns in the dumpster. That's like handing fraudsters a treasure trove of personal information.

You also need make sure to keep your Social Security number, as well as those of family members, safe and secure. Often the IRS will give less scrutiny to the Social Security number of a deceased person or a child than to an adult filing a return, and it's not unusual for fraudsters to scour obituaries and birth announcements, trying to obtain information, Steber says. The IRS's Miller says that so far, 66,000 returns for the 2011 filing year have been stopped for review because they appear to come from recently deceased taxpayers who have no filing requirements

Steber cautions consumers to guard their Social Security numbers at all costs. "You should protect that information like you would a valuable piece of jewelry or other asset."


Read more: http://www.creditcards.com/credit-card-news/id-identity-theft-steal-tax-refunds-returns-1282.php#ixzz1qe6786Ie
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