Identity Theft and Tax Returns: A Problem Worth Millions

Posted by: Brookside Admin

Identity theft has become a major concern for the IRS. There are a number of problems related to false tax returns including, most notably, issuing millions of dollars in tax refunds to the wrong parties. The presence of these identity thieves makes the process more complicated, which slows down legitimate refunds being issued. While it hasn't always been perfect, the effort of the IRS to stop tax ID theft has shown progress over the past few years

  • Capture rate

From the perspective of the IRS, it can only hope to catch fraudulent returns once they're submitted but before a refund is issued. In recent years, they have been increasingly effective at doing just that. In 2012, the IRS prevented more than $19-billion in refunds from being issued by spotting 91-percent of the submitted false returns. In 2013, a reported 382,398 tax returns were confirmed as identity theft returns. The IRS reported stopping 92-percent of false returns that year and up to 95-percent in 2014. These false returns refer to more than just idenitify theft, however. It also refers to those who claim fake or ineligible dependents, or those that claim an incorrect amount of taxable income in order to obtain additional credits or deductions. Virtaully any time someone tries to submit false information in order to receive more money from the IRS, it qualifies as a fraudulent return. 

  • ID Theft

While there are multiple ways to defraud the IRS, the most costly is through identity theft. Consider that so far in 2015 alone, more than $121-million in tax refunds have been issued to identity thieves. That sounds like a lot of money being issued falsely, but the IRS was also able to prevent another $787-million from being issued by catching ID theft returns in time. By May of 2015, the IRS had already 163-thousand fraudulent returns that used identity theft. That continues a decline, however, from previous years. In 2014, the IRS identified more than 235-thousand such returns, and in 2013, more than 382-thousand identity theft returns were submitted. 

  • Fraud filters

The reason that a higher percentage of fraudulent returns are being caught, perhaps why fewer criminals are trying to submit identity theft returns, is the additional filters put in place by the IRS. Each additional filter provides more scrutiny into the details of a return. In 2014, the IRS has 114 filters in place while processing returns. In 2015, they've been using 196 filters specifically for identifying fraudulent returns. That increased scrutiny is great for limiting the amount of money ID thieves make off with, and helps bring them to justice, but it also means the entire process takes longer. In many cases, legitimate returns are flagged during the filtering process and taxpayers have to verify information. Until verification occurs, that return makes no more progress, which means the time it takes to process it and return a refund is that much longer. Expect more filters in place by 2016 and an even longer wait for many taxpayers. 

At Brown Kinion and Company, we help our clients find the deductions they qualify for and get the refund they deserve. We can even help you keep your identity safe throughout the whole process. Come see us out our offices in Tulsa / Bixby or Broken Arrow, or give us a call.