You can find many articles like this one if you search for them. The link brings you to a Sunday article describing 50 people lined up outside of a Plantation, Florida office hoping to resolve a situation where they are a victim of identity theft and have been waiting months to receive a refund. For the past 2 years, I've been processing identity theft cases. I've probably worked between 2,000 and 3,000 of these. I don't have statistics, but easily 1/2 of the cases I've worked originate from Tampa south to Miami. The Atlanta, Georgia area is a distant 3rd behind Tampa and the Miami metropolitan area in sheer number of cases. A significant other number of cases are more proportionally spread throughout the country with New York, California, Detroit, Dallas, and Chicago showing up frequently in my inventory. I would say that over 75% of the "victims" of tax related identity theft come from the lowest quintile of the economic strata. While victims include deceased people, middle class people, and occasionally wealthy people, theirs are the exception. In working these cases, there are a lot of trends that would disturb most Americans. Typically, the thief files an electronic return after somehow gaining access to a person's SSN and birthdate. Sometimes the return is filed as single, but if the thief has also stolen the identity of minors they will file head of household and claim EIC. For income support, the thief merely has to know the name and EIN of a business and they can file the return and claim withholding credits. A favorite credit is the American Opportunity Credit (the education credit). All you have to do is fill out Form 8863. You don't even have to prove you paid tuition. The typical fraudulent refund emitted is between $1,000 and $9,000 dollars. At the Austin Center, we currently have about 60,000 cases in our inventory. Probably 2/3rds of these instances resulted in refunds and maybe the other 1/3rd was stopped. You can do the math. What is interesting to me, is what so many of the "good tp" returns look like. Typically, the real owner of the SSN is a single person, although sometimes the secondary filer on a joint return is the victim when a thief files on their number. More often than not, the "victim filer" that actually owns the SSN is low income and the bulk of their refund is refundable credits. Most - more than half - of these filers claim the American Opportunity Credit. By the time I get the case, I am able to pull up a data base and see if an institution issued a 1098-T indicating tuition was paid. Usually that is not the case, but they claim the credit anyway. Since the return is considered the original return, it is not necessary to prove anything and I am obligated to adjust the account and grant the credit. Oh well, it's only $1,000 and they probably need the money. Another thing I see frequently, is that the "good filer" claims self-employment income; usually hair stylist, hair braider, or child care. (I laugh, because based on the cases I've worked, one would have to deduce that if you work in the hair industry, you would be 10 times more likely to be a victim of identity theft than the general population.) Why would someone claim fictitious SE income on which they pay tax? Because the refundable credits make it worth it. By claiming $12,000 as a hair stylist, you would pay around $1,600 in SE tax. But with 2 children, you would receive over $5,000 in EIC and $2,000 in advanced child credit. Throw in a bogus Education Credit and you are up to $8,000 in refundable credits. The net refund is $6,400. So what we have is a thief stealing an identity and coming away with four or five thousand dollars of the public's money followed by the real person or "victim" filing a fraudulent return and bringing home another five or six thousand. I suppose the economy in South Florida is doing a little better now as a result of the theft/fraud induced stimulus. Certainly car sales and electronic sales would be better in South Florida than they would be otherwise. But it's our future that's being robbed._ Anyway, I just wanted to vent a little because at times it gets to you when you see this day after day.
big problem. i have been against refundable credits since I learned of them. if you do away with those then you will do away with this fraud.
Why were they ever given in the first place? It seems logical that if you don't pay taxes you don't get a "refund" which implies that you paid some taxes.
Politics doesn't have anything to do with it. Most of these fraudulent tax returns are filed in early January when the filing season starts, which is way before the IRS receives its financial information from the various payers of income.
