As if filing an income tax return weren't stressful enough, a growing number of Floridians are experiencing a shock when they submit their returns to the Internal Revenue Service.
The IRS informs the taxpayer that someone else has already filed using his or her name, Social Security number and date of birth.
The criminals use false financial information on the fraudulent return, and in many cases have been sent a hefty refund.
The identity theft scam ranks first on the IRS' annual "Dirty Dozen" list and is surging as sophisticated criminals access databases or other information on the Internet . Electronic filing makes it easier for fake returns to be filed, although the identity theft often starts outside of the tax system, identity theft experts say.
After the IRS notifies the legitimate taxpayer of the fraud, he must prove who he is. That means filling out an IRS identity theft affidavit, filing a report with local law enforcement and notifying the Federal Trade Commission.
A new return must be filed in a paper version that must be mailed.
For those who were anticipating a refund, it means a delay of 90 days or longer as the IRS looks into the matter.
"The sad part is that a lot of these people are depending on these refunds. When their return gets rejected, and it gets delayed three or four months, they don't know how they will pay their bills," said Jarrett Perry, a partner in Perry & Associates, a suburban West Palm Beach accounting firm.
Low-income people who qualify for earned income credits have seen refunds of as much as $10,000 delayed. Perry said last year none of his clients experienced the problem.
"This year I've had five so far, and it's only February," Perry said.
The IRS says fraud is occurring with both living and deceased people's information, and it has increased its internal reviews.
From 2008 through 2011, an estimated 404,000 people were victimized by identify theft tax fraud. Of those, 262,000 fake returns were stopped in 2011, preventing nearly $1.5 billion from going out the door, said Plantation-based IRS spokesman Michael Dobzinski. He said he did not know how much was paid to fraudulent filers.
In late January, the IRS and the Justice Department announced the results of a massive nationwide sweep, cracking down on 105 suspected identify theft perpetrators in 23 locations. Nine defendants in Florida were charged with wire fraud, false claims and aggravated identity theft.
Despite the stepped-up efforts, the problem is escalating .
"It's happening all over the country," said Adam Levin, co-founder and chairman of Identity Theft 911 in New York. "It is happening more because it works. The sophistication level of hackers has grown significantly with an economic environment where people are looking for alternate revenue sources. On top of which you have breaches reaching catastrophic proportions with hundreds of millions of files being accessed since 2005."
Palm Beach County Sheriff's Office spokeswoman Teri Barbera said that although the agency has no statistics available, anecdotally the problem is more prevalent this year.
Marjorie Wong, 52, of Lantana was one of four people in one recent week who notified Lantana police about being victimized . "I don't know how it happened," said Wong, who is in the process of refiling.
Another South Florida tax identity theft victim, a state employee who asked not to be named, was told the IRS would process his return within 90 days, but had "no timetable" for his refund. The IRS held the "suspicious" return filed by the thieves for an undisclosed time period, but then sent the refund to a bank card. Similar to a gift card, the bank card is used to receive a one-time refund.
The identity thief filed electronically through a TurboTax account he opened using the victim's identity, though the taxpayer already had a TurboTax account.
"I asked TurboTax why they didn't notify me about the new account being opened with my information," the man said.
"It's not uncommon for people to use or open multiple accounts," said Colleen Gatlin, spokeswoman for TurboTax's parent company, Intuit. "An email account may change from year to year, or may no longer be valid or they open multiple accounts because they forgot their user name/password so they just create a new one."
However, she said, they are working to prevent and detect suspicious activity.
"There's no doubt that we have seen an increase in this, " said Raphael Arrazone, a district manager for H&R Block, which has 47 offices in Palm Beach County.
People are shocked, and for the tax preparation firms that sometimes receive their fees during the electronic refund process, it means they might not get paid.
"I have helped
Todd Stahl, owner of Liberty Tax Service in Lake Park, said part of the problem lies with unscrupulous tax preparers who help prepare the false returns.
Stahl said the area is seeing other types of tax fraud as well. He's heard of preparers who will file a return without a W-2, based on a paycheck stub alone, which is illegal. Later, the clients receive a nasty letter from the IRS, then turn to his firm for help.
Perry said the IRS issues personal identification numbers to identity theft victims. They have to use the PIN from then on when filing tax returns.
"The IRS should be proactive and issue everyone a PIN, if they want to nip it in the bud. They should mail the PIN to the address of record," Perry said. "The biggest problem is that the repercussions are so small. It is so easy for them to get away with it."
Identify Theft 911's Levin agrees: "The chances of being discovered are a great deal more limited than if you walk into some place carrying a gun."