IRS Refunded $4B to Identity Thieves

[Elrod]

(AP) - The Internal Revenue Service issued $4 billion in fraudulent tax refunds last year to people using stolen identities...The IRS sent a total of 655 tax refunds to a single address in Lithuania, and 343 refunds went to a lone address in Shanghai.

http://news.yahoo.com/report-irs-refunded-4b-identity-thieves-190034348--finance.html

[Guest Taxed]

And this will continue until Congress changes the law that income and identity must be verified before a refund is issued.

This rush to issue a refund within 2 weeks before any wage and income data is compiled and verified is the root cause of this error.

I mean even your local bank puts a hold until the check cashes before releasing the money?

[mrichman333]

They held my nieces refund till May, she files the first week. The refund was for $900. So I don't get it

[kcjenkins]

It does seem like they could AT LEAST hold refunds going to out-of-country addresses until verified, doesn't it? And multiple refunds to the same address, ditto.

[Guest Taxed]

It does seem like they could AT LEAST hold refunds going to out-of-country addresses until verified, doesn't it? And multiple refunds to the same address, ditto.

Absolutely and if the refund is more than $1000 identity verification for direct deposits.

[kcjenkins]

If they wanted to assign the resources to it, they could even tie the returns to prior years which had been verified, so that the majority of legit returns could get the fast processing. If they did that hardly any honest tp would be delayed, but most of the scammers would be blocked. Maybe the IRS could find money for this programming, if the cut out the spoof videos and the conferences?

[Mr. Pencil]

If they wanted to assign the resources to it, they could even tie the returns to prior years which had been verified, so that the majority of legit returns could get the fast processing. If they did that hardly any honest tp would be delayed, but most of the scammers would be blocked. Maybe the IRS could find money for this programming, if the cut out the spoof videos and the conferences?

I'm not sure money is the main problem with federal contracts for computer programming! Let's see. ACA created a political firestorm as a new way to process 11 million applications over six months. Are you suggesting a new way of processing 150 million tax returns over six weeks?

[kcjenkins]

No, I'm suggesting that they use info they already have, to sort returns into two groups, those with a verified history in their system and those that do not.

[Catherine]

Automatic flagging of foreign addresses is easy, fast programming.

Automatic flagging of multiple copies of the same address should be nearly as fast.

[SaraEA]

Why doesn't the IRS just go back to the way it used to be, a KC suggested, when you had to enter last year's AGI in order to efile? ID thieves wouldn't be able to sign the returns electronically (Form 8879) without this info. I recall that the IRS dropped this rule to encourage efiling back in the days when it was still catching on and they had goals to meet. Well, efiling has caught on and the agency is way ahead of its goals. So let's take a step backward and require last year's AGI. It would cut the problem of identity theft with little effort at all.

[Guest Taxed]

I am surprised that the professional trade groups (NATP, EA, CPA) have not made this recommendation? And if they have, I am interested to know why IRS is against it.

I have a feeling that there is more political pressure to send refunds ASAP in spite of the inherent risks.

We all know that with Politicians, emotions matter more than logic :wall:

[easytax]

(AP) - The Internal Revenue Service issued $4 billion in fraudulent tax refunds last year to people using stolen identities...The IRS sent a total of 655 tax refunds to a single address in Lithuania, and 343 refunds went to a lone address in Shanghai.

http://news.yahoo.com/report-irs-refunded-4b-identity-thieves-190034348--finance.html

And this will continue until Congress changes the law that income and identity must be verified before a refund is issued.

This rush to issue a refund within 2 weeks before any wage and income data is compiled and verified is the root cause of this error.

I mean even your local bank puts a hold until the check cashes before releasing the money?

Absolutely and if the refund is more than $1000 identity verification for direct deposits.

Why doesn't the IRS just go back to the way it used to be, a KC suggested, when you had to enter last year's AGI in order to efile? ID thieves wouldn't be able to sign the returns electronically (Form 8879) without this info. I recall that the IRS dropped this rule to encourage efiling back in the days when it was still catching on and they had goals to meet. Well, efiling has caught on and the agency is way ahead of its goals. So let's take a step backward and require last year's AGI. It would cut the problem of identity theft with little effort at all.

Even writing code in "old basic" there is an easy way to see if multiple refunds are going to one address .. just lazy.

The "rush to refund" is similar to the housing problem caused by the government ("it doesn't matter if they can afford the house --- they deserve the right to get one -- so banks, mortgagors, etc. you guys take the loans and OK them (even though initially these groups fought the idea but were forced to do it - by the government).

Initially we as preparers could not have refunds deposited to us (still can't) but the government does not now, even verify the account names are correct for the refund being deposited?????

As far as last years AGI --- (government thinking) - that would just slow the refund because you know the average tax payer is too dumb to know where their records are (if they kept them) to look up the number to use this year.

My solution is simple (remember -- it has to be to get into my simple mind :-) ). Keep calendar year as reporting date (Dec. 31, ????) for everyone, people and all business AND make it for all data --- investments, stocks, anything, etc.) with the "get to taxpayer date of January 31, ????) with substantial penalties for those people, businesses, companies, entities, etc., that don't. These changes should be combined with tax preparer season starting February 15, ???? and running until May 30, ????.

We'd also need to have the government make any changes to the tax code by the end of --- say --- September or it would have to wait until the next year to be implemented. Then the IRS would have the time to get all the forms, form approvals for the software companies, etc. done and not hold up the tax season (see my last paragraph - on confusion).

We'd have the same time --- but --- we've have (or should have if clients aren't totally dumb) all the forms, data, etc. to do the job once and done. The government could then have everything computer matched, verified and actually make a lot of the "problems" go away.

Our politicians created the current time frames and problems --- tax season starts before all the documents are even due to be in the hands of the tax payers (broker statements, interest, w-2's. Some are due end of January; many not even required until March with some. But the tax season starts a few weeks (unless in 2014 it's Jan. 21)before the "paper work" is supposed to be out to the taxpayer. And then they (government) get upset because the system can be manipulated.

Maybe the idea is to cause confusion --- from my law enforcement career, everyone of the "bad guys" (some were actually decent) all believed there was "profit in confusion" one way or another ---- maybe they learned that from our politicians.

[jshtax]

(AP) - The Internal Revenue Service issued $4 billion in fraudulent tax refunds last year to people using stolen identities...The IRS sent a total of 655 tax refunds to a single address in Lithuania, and 343 refunds went to a lone address in Shanghai.

http://news.yahoo.com/report-irs-refunded-4b-identity-thieves-190034348--finance.html

Sounds like the IRS has some issues but who did not know that. It infuriates me we have to put up with them.