IRS identity theft crackdown nets 109 arrests

Feb. 7, 2013 at 5:43 PM ET

Federal authorities have taken action against 389 theft suspects as part of a coast-to-coast crackdown on identity theft, the IRS announced Thursday.

The Internal Revenue Service sweep took place in 32 states and Puerto Rico in recent weeks in an attempt to thwart identity thefts.

“The IRS is very serious about prosecuting identity thieves and protecting American citizens,” said Steven Miller, IRS acting commissioner, during a telephone news conference.

The crackdown has led to 109 arrests and 189 indictments, Miller said.

Clearly, the IRS wants everyone – taxpayers, tax preparers and criminals – to know it is focused on the problem that has hurt so many victims, stolen so much money from the U.S. Treasury.

What is tax refund identity theft?

For identity theft victims, paying taxes is a nightmare

It’s when an identity thief uses a stolen Social Security number to file a false return in the victim’s name and claims a large refund. It can be done electronically or with a paper return.

If the refund is paid to the crook, the real tax payer cannot get his/her refund until the situation is investigated and it’s verified that their refund was indeed stolen. This can delay the process by weeks or months.

While enforcement actions are on the rise, the problem continues to grow. Miller said IRS is getting better at spotting false returns and blocking payment, but he admitted, “We still have work to do.”

He called identity theft one of the “biggest challenges” facing the agency, one that threatens the IRS and people’s view of the IRS.

Just look at the numbers.

Last fiscal year, the IRS stopped $20 billion in fraudulent refunds, up from $14 billion the year before. How much money made it into the hands of the crooks? Miller told NBC News there’s no way to know what they didn’t catch.

Online tax filing popular with taxpayers – and thieves

One indication of the continued problem is the growing number of taxpayers who are given a special IRS Identity Protection PIN to use when filing their taxes because they’ve been victimized by an identity thief. The IRS issued 250,000 of them in 2012. So far this filing season they’ve given out 770,000.

More jail time

The IRS wants you to know that number of convicted tax identity thieves continues to grow and the sentences are getting longer. The average sentence is now four years. But some refund cheats get much more time behind bars. Two recent examples:

  • On December 21, 2012 in Memphis, Tenn., Aundria Bryant-Branch was sentenced to 262 months in prison and ordered to pay back $690,000 in restitution to the IRS. She was charged with passing along stolen information to crooks who used it to file false tax returns.
  • On November 7, 2012, in Chicago, Andrew Watts was sentenced to 114 months in prison and ordered to pay $1.7 million in restitution. According to court documents, Watts filed more than 470 false federal income tax returns in the names of people who had died. In all, he claimed fraudulent refunds of more than $120 million.

Spotting refund identity theft

The IRS says you could be the victim of tax refund identity theft if you are notified by Internal Revenue or you tax preparer 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.
  • IRS records indicate you received more wages than you actually earned.
  • Your state or federal benefits were reduced or cancelled because the agency received information reporting an income change.

The IRS contacts possible ID theft victims by mail. The agency never initiates contact via email. So if you get an email indicating you should contact the IRS – it’s bogus. But con artists also send out letters that look like they are from the government. If you get a letter that indicates you may be the victim of identity theft, do the smart thing and contact the IRS at a number you know is legitimate: 1-800-829-1040.

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Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitteror visit The ConsumerMan website.