By Edward Fitzpatrick
Posted May. 7, 2015 at 12:01 AM
One day in early April, Dr. Paul Morrissey’s wife walked into the room and said: “I know this is a stupid question, but you didn’t already file our taxes for this year, did you?”
The answer was obvious: “No, I didn’t,” he said, “just like all the past 23 years we’ve been married.”
“Well, somebody did,” Dr. Dina Morrissey said, “and they’ve got our refund.”
I run with Paul Morrissey and three other guys on Saturdays, and two of the four had their tax refunds stolen by thieves who filed electronic returns using their identifying information (such as Social Security numbers). So either I’m in a particularly unlucky running group, or this problem is bigger than all of us.
Morrissey said he reported the theft to the Barrington police, and they told him the department had received 60 other reports of tax fraud this year. The Internal Revenue Service has reported a “substantial increase in identity-theft refund fraud.” According to a November 2014 report by the U.S. Government Accountability Office, the IRS paid out $5.8 billion in fraudulent identity theft refunds, while preventing or recovering about $24.2 billion for the 2013 tax filing season.
On Tuesday, The Wall Street Journal reported that the IRS “has set up a new criminal-investigation team” to “tackle a nearly fourfold jump in identity-theft cases since 2011, many of which involve hackers stealing information in order to collect victims’ tax refunds.” It reported that the IRS has traced $26 million in criminal profits to countries such as Russia, Bulgaria and Nigeria, and intelligence shows criminal groups stockpiling data for the 2016 tax filing season. Meanwhile, Governor Raimondo plans to sign an executive order creating a Cybersecurity Commission on Thursday.
Rhode Island Tax Administrator David M. Sullivan said he plays basketball on Mondays and two other players had their tax refunds stolen by identity thieves. “It’s all around the country right now,” he said. “It’s a big issue.”
As president of the Federation of Tax Administrators, Sullivan went to D.C. in March for a summit with officials from the IRS, states, H&R Block and software companies such as Intuit, maker of TurboTax. The theory is that data breaches at big retailers and other businesses gave hackers the information they needed to electronically file for tax refunds, and summit participants are looking for ways to improve identity authentication systems, with recommendations due this summer, he said.
In Rhode Island, tax officials tightened security checks and increased overtime in February after they saw a surge in fraud, Sullivan said. Thus far this year, the state has processed 400,000 total tax returns and put 18,000 of them on a “stop list” because of potential fraud, he said. Victims such as the Morrisseys do end up getting their refund, but the government is often unable to recover the stolen money, he said.
Victims of identity-theft refund fraud should report it to the police, fill out the IRS identity theft affidavit and contact the state Division of Taxation at: (401) 574-8829 Option 3 or firstname.lastname@example.org.