Home > 2013 > Identity Theft

When Tax Fraud Won’t Go Away

Advertiser Disclosure Comments 0 Comments

By Kelly Santos

Tax season used to be simple for David Parker. His accountant electronically filed taxes for his businesses and investments, and the refund arrived promptly in the mail.

But in the past few years, fraudsters have hit Parker again and again, despite IRS efforts to resolve the problem.

Parker is among a growing number of taxpayers who are becoming repeat victims of tax-related identity theft. “It’s a pattern we’re seeing on the rise,” said Brett Montgomery, who helps resolve identity fraud cases for Identity Theft 911. “The IRS investigation process takes so long to run its course, that victims are getting hit year after year. It’s a vicious cycle.”

The IRS has 210 days to contact victims after they submit a fraud complaint. If a refund or a letter of intent isn’t issued at that time, victims can petition for a referral to a case manager. The first referral request has a 45-day window. If victims don’t receive a response, they can request a second referral, which has a 30-day turnaround time. The third referral has a 10-day window.

That means some victims can go as long as 300 days without hearing from the IRS.

“There is almost nothing the taxpayer can do to speed things along,” said Vicki Volkert, a fraud investigator at Identity Theft 911. “And once you are working with the IRS to address the fraud, if something fails along the way — if the taxpayer’s record isn’t updated with the correct address, for example — it can derail the whole process. Anything missed can create another problem.”

In Parker’s case, his personally identifiable information (PII) was stolen when there was a break-in at his insurance broker’s office. He suspects that fraudsters used his PII from that event to file a fraudulent return before he filed in 2010, and a refund was sent to the thieves. It happened again in 2011, although the IRS had assured Parker otherwise because his account was flagged. When he tried to resolve the matter on his own, he had difficulty reaching two case workers assigned to him. They didn’t return his voicemail messages. Every time Parker contacted the IRS, he said, “It was like starting all over again.”

Because it was a case of double-trouble fraud, it required immediate and drastic measures. Parker’s credit files were flagged with a seven-year fraud alert, to tell creditors that he was a victim of identity theft and to verify with him all applications for credit. He also did the following:

  • Filed a police report
  • Filed an affidavit of identity fraud with the U.S. Department of Commerce
  • Contacted the Social Security Administration to correct his earnings statements
  • Contacted all three credit bureaus
  • Filed a fraud alert with the National Banking Service

At some point, the IRS claimed that Parker owed them $4,300. “That was the real kicker,” Parker said. “That was the amount, with interest, that they wrongfully refunded to whoever stole my identity.”

Ultimately, Parker got in contact with a public tax advocate, who finally got Parker’s name — and tax record — cleared. His problem took a year and half to fix.

Though it could create procedural challenges for the IRS and the U.S. Postal Service, Parker suggested that Congress could solve the problem by simply refusing to issue refunds before April 15. That way they could see who has duplicate returns filed, and investigate before signing over checks to the bad guys, he said.

In the meantime, Volkert suggests victims of repeated fraud file their taxes early — in January or February — to beat criminals to the punch. Procrastinating on your taxes gives thieves plenty of time to pick their targets.

Taxpayers who suspect they may be victims of tax-related identity theft are encouraged to call their providers. A bank, credit union, insurance company or membership organization may provide free identity management services.

[Featured Products: Research and compare Identity theft protection plans at Credit.com]

Image: www.seniorliving.org, via Flickr

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team