Taxable Talk

The IRS has been making noises that they are more aggressively pursuing identity theft and tax refund fraud. My bank (Bank of the West) sent me a notice on these issues. (I assume it was sent to all Bank of the West customers who were identified as tax preparation firms.)

The letter notes,

The American Bankers Association (ABA) and Internal Revenue Service (IRS) have issued bulletins regarding a significant increase in the number of fraudulent tax refunds filed using stolen Social Security or Tax Identification Numbers. Tax refund fraud involves identity theft, fraudulent W-2 forms and the online filing of fraudulent tax returns for the purpose of receiving a tax refund deposit into the account of a fraudster or an accomplice acting on behalf of the fraudster. Variations of this fraud scheme also include using an unwitting tax preparation firm.

I have not heard about the “unwitting tax preparation firm” issue prior to this letter. Indeed, I suspect that unwitting tax preparation firms are a drop in the bucket of the problem. The 80-20 rule is almost certainly applicable here: At least 80% of tax fraud is committed by 20% of the fraudsters.

That said, the letter and notice are important in how they’ll likely be used in the upcoming tax season. I suspect that banks will match names with the name that the IRS has on file. In most cases these will match. Trouble could ensue, though, for individuals who have recently changed their names. Consider Jane Doe who recently married and became Jane Smith. She’s changed her name with the bank (and the Social Security Administration). However, the IRS doesn’t have the updated records from Social Security, so she’s still Jane Doe. When her refund is issued, it bounces because of the name issue. Individuals who recently changed their names may want to get paper check refunds from the IRS this year.

While I salute the IRS (and the banks) for doing something, this effort is equivalent to patching one hole in a roof that has over a hundred leaks. Hopefully, other efforts are underway. Unfortunately, until I see otherwise I suspect the IRS remains reactive instead of being proactive on the issue of identity theft.

Tags: IdentityTheft

This entry was posted on Monday, December 9th, 2013 at 2:12 pm and is filed under IRS. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.