Tax season and technology are creating more fraud and more problems for taxpayers, say federal government officials and local tax preparers.
“Some of the scams we are seeing are pretty sophisticated,” said Peggy Riley, an IRS media relations specialist for New England who also serves New York. “Fraudsters create their own W-2s and use other information that helps them file a fraudulent return.”
The number of identity theft related criminal investigations increased by 66 percent between 2012 and 2013, according to the IRS website. As recently as this January, for example, a Rochester man was sentenced to 12 months in prison for conspiracy to commit tax fraud in connection with a large nationwide tax refund scheme, according to the website.
To combat the growing crime, the IRS has assigned more than 3,000 employees to work on identity theft-related issues, according to the IRS website
In the Syracuse area, tax fraud is a little less common, say some local tax preparers.
Mary Ann Winters, an accountant for Sirchia and Cuomo accounting firm in Syracuse, files tax returns for roughly 400 clients per year. Of those, only one or two end up being a victim of identity theft, she said. An increase in tax fraud cases has a lot to do with the efficiency and convenience of filing tax returns online, she said.
“There’s no denying that technology has made filing fraudulent tax returns easy to do,” Winters said, “Electronic filing is just efficient. People can have a refund deposit within 10 days in their bank account.”
Part of the problem, Winter said, is the ease with which criminals can get access to personal information such as Social Security numbers and mailing addresses. For example, she said, one of her clients, who has since died, was living in a nursing home when her identity stolen by one of the nurses caring for her.
“It’s very upsetting for the people it happens to, especially the elderly. They are the most vulnerable. They don’t tend to keep as much track of their personal information,” Winters said.
Sue Hansen, who runs Hansen’s Advisory Services in Syracuse, agrees that identity theft does not occur very often. But when it does, the process of notifying the IRS and launching an investigation can take years, she said.
“It’s not easy at all. There’s so much paperwork to go through and questions to answer,” Hansen said. “You hear of many cases where people can no longer use their own money and assets are frozen.”
Hansen keeps all financial records for each of her 300 clients online. But, she said, she doesn’t worry about the security of her computers because a professional IT company maintains them.
Despite her efforts to secure her servers, many of her clients are still wary of passing along personal information. “I see it all the time. The reluctance to be giving us a copy of their drivers license and other information,’ Hansen said.
Lee Kalin, a partner at Lee Kalin and Associates in Syracuse, said some of his clients have expressed concern about having their tax information hacked through the IRS website. But, he said, that’s rare because of the IRS’ comprehensive online security systems.
Identity theft, he said, is much more likely when “people are careless.” For example, he cited cases where people have had their identity stolen by simply not thoroughly shredding their financial documents.
To help prevent identity theft, the IRS’ recommendations include:
- Don’t carry your Social Security card or any documents with your Social Security number on it.
- Don’t give a business your Social Security number except when it’s required.
- Check your credit report every 12 months for signs of purchases or debts that are not yours.
If you are a victim of identity theft, the IRS suggests requesting an Identity Protection Pin – a 6-digit number assigned annually to victims of identity theft that helps identify the rightful filer of a return.
(Anna Giles is a junior with dual majors in broadcast journalism and international relations.)