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For some, this tax season is more unpleasant than ever

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Across Florida and the nation, a growing number of people are falling victim to tax refund fraud.

By Mitch Traphagen

This year, some people will find that tax season carries with it a very unpleasant surprise. Across Florida and the nation, a growing number of people are falling victim to tax refund fraud. According to the IRS, nearly a quarter of all Americans wait until the last week to file their taxes and this year, the unpleasant surprise for some will be that someone else didn’t wait — and has already filed their taxes and collected a refund on their behalf.

It is a problem that lacks a clear resolution, although in the end, the U.S. Treasury will carry most of the losses, which actually means the U.S. taxpayers. For the victim, there is no easy road to take to resolve the problem. Largely because the crime crosses multiple jurisdictions, local law enforcement is nearly powerless to stop or fix it. Privacy laws even tie the hands of the Internal Revenue Service, making a resolution a long-term prospect. For the victim, that means long-term problems that are associated with the theft of their identity. For those expecting a tax refund, it could also mean a very long wait for the refund check.

The scam is relatively simple: a thief steals your personal information and files a phony tax return on your behalf, with a refund via check or debit card sent to a false address. Due to the sheer volume of returns  sent to the IRS, the agency does not always have the resources to match up reported income with the W2 payroll forms from employers, or to perform other possible verifications before issuing a refund. Thus, the crime often goes undetected until the victim files a legitimate return.  In addition to the shield of privacy laws, the crime has grown through what were good intentions on the part of the IRS — to provide taxpayers with speedy refunds.  That goal, however, does not allow time to fully verify returns before refunds are sent.

Congresswoman Kathy Castor, representing Tampa and parts of Hillsborough including the south county area, has been leading a charge towards finding a solution to make it easier for the IRS to participate in fraud investigations, thus decreasing the amount of time it takes to resolve the problem for the victim. Last year, Ms. Castor wrote to U.S. Treasury Secretary Timothy Geithner after a series of such crimes were exposed in the Tampa Bay area.

Congresswoman Kathy Castor“Personal information is being stolen and used to file phony tax returns in order to secure refund checks and debit cards from the federal government,” she wrote. Local authorities estimate that the tax fraud racket has cost the federal government millions of dollars in my community and billions nationwide. At a time when Congress is scrutinizing every tax dollar, we must improve federal operations and law relating to such investigations and prosecutions.”

The crime has few limits on victims, they include everyone from young people filing their first returns to the elderly. The victims have even been police officers, including the widow of one Tampa officer killed in the line of duty in 2010. The Observer News has recently received anonymous reports of victims residing in assisted living facilities in Sun City Center.

From the standpoint of an organization the size of the IRS, it is difficult to justify devoting investigative resources to a single fraudulent tax return because most fraudulent refunds tend to be thousands of dollars rather than tens or hundreds of thousands. But many small individual returns add up to big dollars, and that has caught the attention of both law enforcement nationwide and Congress.

“The Tampa Police Department advised me that their investigation was complicated at every turn by laws that prohibit the IRS from sharing information,” Castor continued. “While we all value personal privacy safeguards, there must be a way for the IRS and local and federal law enforcement agencies to investigate fraud together.”

Castor went on to describe how in some cases, suspects were found with multiple, fraudulent tax refunds in their possession but current laws prevented the IRS from connecting those refunds to the legitimate taxpayer. As a result, local law enforcement could only charge them with identity theft rather than the often more serious crime of tax fraud.  And the problem has grown so large, it is taxing the resources of local authorities.

Of course, prosecution is an afterthought for the victims of tax refund fraud. But as all agencies, including the IRS, become increasingly sensitive to the growing problem with tax return fraud, prosecutions should increase in number and visibility, making what is now a fairly simple crime into one that carries big consequences. Typical jail sentences for those convicted of tax fraud run three to five years. Ironically, just as hard-to-investigate fraudulent single returns add up to big dollars in sum, so could the jail sentences for those eventually convicted, and those three-to-five-year jail sentences add up to big numbers for a con artist caught with 20, 30 or even hundreds of fraudulent refunds.

Victims of tax refund fraud should call the IRS at 800-908-4490. Those living in Congressional District 11, which is generally west of U.S. Highway 41 through South Hillsborough, may call Congresswoman Kathy Castor’s office in Tampa at 813-871-2817. Those living in Congressional District 12, generally east of U.S. 41, may call the Lakeland office of Congressman Dennis Ross at 863-644-8215.

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