Tax fraud costs billions and takes time to clear up

Posted:
SCOTTSDALE, AZ (3TV/CBS 5) - Identity tax fraud is one of the biggest tax scams around. Often, people don't know they're a victim until they file a return, only to learn the Internal Revenue Service already paid out a refund with their Social Security number.

Jay Quinton of Scottsdale likes to relax with his dog on his days off from flying airliners. But over the past year, he spent a lot of time in his office, sending letters to his congressman and cleaning up questions about his tax filings.

“The end of April, first of May,” he recalled, “we got a letter from the state of Oklahoma wanting us to verify our tax numbers. What? I thought it was a scam or something.”

Quinton has never lived in Oklahoma, nor Michigan where someone received a tax refund using his name and Social Security number. The fraudsters also filed an Arizona and a federal return, delaying Quinton's real returns.

“You would think that the IRS especially could just do a few little checks and go, this is the bad one, this is the good one," he said.

Thieves can do this in the world of electronic filing. States and the IRS are working to catch up to this problem that cost the country billions last year.

Thieves are using real Social Security numbers and addresses, but fake W-2 forms. Because it's all electronic, they can have the money sent anywhere.

“They're not going for the big refunds,” said Sandra Abalos, a CPA in Phoenix. “It's the small, little 1040-EZ returns with two, three, four thousand dollar refunds that are processed immediately within days.”

Abalos said they've seen this scam pick up steam in the past two to three years. She said it can take months for taxpayers to get their refund after filing an identity theft affidavit with the IRS. And there is other paperwork for the states.

And, of course, victims are left wondering if it will happen again.

“You're watching your back now,” Abalos said. “Somebody has my name, my Social Security number, date of birth, my signature. So, what kind of harm can they do with that information? Well, the answer is quite a bit.”

“You have to send in copies of your picture ID and a couple of forms of government ID,” Quinton said as he flipped through a large folder of paperwork he saved after his experience.

Quinton finally received his federal refund last fall. He cleared his name with Oklahoma and Arizona. He is still working on Michigan and wondering if it's time to relax.

“You hear a little bit about some of this and you think, well, it's not going to happen to me,” he said. “But it's happening to a lot of people.“

If you suspect someone stole your identity, even if it hasn't affected your taxes, you can file a form with the IRS that puts them on alert.

That affidavit is Form 14039.

If you experience tax fraud, report it to police and file IRS form 3949.

You should also contact the Arizona Criminal Investigations Office at 602-542-4023.

The IRS has an entire section of its website devoted to this problem. Just go to www.irs.gov/uac/taxpayer-guide-to-identity-theft.

Copyright 2015 KPHO/KTVK (KPHO Broadcasting Corporation). All rights reserved.
  • Social Connect

  • Contact

    AZ Family