It’s a heart-stopping realization: Someone else has filed an income tax return in your name. Using your Social Security number.
It’s a problem that’s upsetting taxpayers and frustrating state and federal tax agencies.
This year, Maine Revenue Services expects the number of fraudulent income tax returns using stolen identities to double.
“Every year we have more fraudulent returns that we catch. We’re trying to stay one step ahead of things,” Dennis Doiron, director of the Maine Revenue Services’ income tax division, said.
Fraudulent tax returns are nothing new. For years, state and federal tax agencies have dealt with false returns bearing fake names and bogus Social Security numbers filed by scam artists looking for a tax refund they didn’t deserve.
But over the past few years, scammers have started using stolen identities. Because the returns bear real names tied to real Social Security numbers — and, in some cases, real employers or other accurate information — it can be hard for agencies to catch them right away.
Sometimes it doesn’t happen until the true taxpayer tries to file a return.
The IRS reported just over 440,000 identity theft incidents in 2010, according to the Treasury Inspector General for Tax Administration. By 2013, that number had jumped to 2.9 million.
“It is a serious concern for the IRS,” IRS spokesman Mark Hanson said. “It’s made our list of ‘Dirty Dozen’ scams.”
In Maine this year, Maine Revenue Services expects to receive about 2,500 fraudulent income tax returns bearing a stolen identity. Although that’s a fraction of the 650,000 to 700,000 returns sent in, it’s twice the identity theft returns the agency saw last year.
“Compared to the total that we get, it’s not a lot,” Doiron said. “But from the state’s perspective, we don’t want to be sending any money out to people who don’t deserve it.”
Those 2,500 fraudulent returns are expected to amount to $3 million to $4 million.
Experts believe massive data breaches may be contributing to the increase in fraudulent returns.
“Whether it be Anthem or Home Depot or different things like that, there’s just more of this happening where people’s information is getting out there. There’s just more opportunity for people to do something with other people’s information,” Phil Doucette, an accountant with Austin Associates in Auburn, said.
Austin Associates’ clients have been among the victims. A few times this year, the accounting firm has tried to send in someone’s tax return only to be told it’s already been filed.
“Thankfully not that often, but more than we have the last few years. It’s happening a little more every year, it seems like,” Doucette said.
Joie Crockett of Lewiston learned that her Social Security number had been stolen and used to file a fraudulent federal tax return when she was at the local IRS office dealing with another matter earlier this year.
“(The IRS representative) says ‘Did you make out a tax return this year?’ I said, ‘No.’ He said, ‘Well, it’s already been filed,'” Crockett said.
She has no idea how someone stole her Social Security number. But she knows she’s not alone.
“I was going down to the IRS office every day working with this guy (on the other matter) and every single time I was in there, there was someone else in there for identity theft. It’s huge,” she said. “I couldn’t believe how many people have been a victim.”
The IRS and Maine Revenue Services say they’re working to catch fraudulent tax returns before any money is paid out, using algorithms, filters and fraud alert systems to flag any return that seems unusual.
Maine Revenue Services is also working with the IRS and other states to share information about suspicious activity.
“Often times, there’s a pattern that shows up and we can set our review criteria differently,” Doiron said.
The IRS has started a pilot program offering unique six-digit PINs to 1.7 million people who have been the victim of identity theft or who live in Florida, Georgia or Washington, D.C., places with high rates of identity theft. Taxpayers who accept a PIN must use it to file their taxes, thwarting scammers who have only a Social Security number.
Maine does not plan to implement PINs for state income tax returns. Maine Revenue Services spokesman David Heidrich said the state would have to mail notification letters to taxpayers, which would go against efforts to go paperless.
Identity theft victims have both responsibilities and rights when it comes to fraudulent returns filed in their name.
They must notify the IRS and Maine Revenue Services that their identity has been stolen and should file a report with their local police department. Even though a tax return has already been filed in their name, they must still file their own return — likely on paper — including a copy of their ID and an identity theft affidavit that stipulates their identity has been stolen. They still must pay any taxes they owe.
It can take weeks or months to clear up a case of tax fraud involving identity theft. An audit by the Treasury Inspector General for Tax Administration looked at 100 such cases between Oct. 1, 2012, and Sept. 30, 2013, and found it took the IRS an average of 278 days to resolve the accounts. And 17 percent of the time that resolution was incorrect.
The IRS said it is working to resolve cases as quickly as possible and streamline its process.
Identity theft victims have the right to contact a taxpayer advocate if they’re facing a financial hardship because their refund has been delayed or if their case is in gridlock.
In Maine, Doiron said, it can take three to four weeks to resolve.
Even after resolution, taxpayers should be aware it can happen again. Some experts advise filing tax returns as early in the season as possible, before a scam artist can swoop in and do it first.
And, if available for federal returns, many experts recommend using a PIN.
“Often with these problems, if it’s one year, it’s multiple years,” Maine taxpayer advocate Deborah Weaver said.
Has someone else filed a tax return in your name? Do this:
* Respond immediately to any IRS or Maine Revenue Services letter notifying you of identity theft. If your tax return was automatically returned because someone else filed in your name, alert both the IRS and MRS that the first return was fraudulent.
* File a police report with your local police department.
* File a complaint with the Federal Trade Commission at www.identitytheft.gov or call the FTC at 1-877-438-4338.
* Place a fraud alert with the major credit bureaus.
* Notify your bank, credit union or other financial institution.
* File your tax return, even if you have to do it on paper. Include a copy of your ID and an identity theft affidavit available through the IRS.
ID protection tips:
* Don’t carry your Social Security card with you.
* Only give out your Social Security number when absolutely necessary.
* Don’t give out personal information online, over the phone or via email unless you initiated contact and you’re certain the person or business is authentic.
* Check your credit report at least once a year.
* The IRS sends letters; it does not initiate contact over email, text message or phone. If you get an unexpected call from someone who claims to be from the IRS and says you owe back taxes, hang up and call the IRS at 1-800-829-1040 to ask if you truly owe any money. If you don’t owe taxes, go to www.treasury.gov/tigta or call 1-800-366-4484 to report the scam.
For more information:
* Taxpayer advocate: 622-8528 (Maine) or 1-877-777-4778 (national)
* Taxpayer guide to identity theft: www.irs.gov/uac/Taxpayer-Guide-to-Identity-Theft
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