Dozens indicted on stolen identity tax refund fraud charges

BY SALLY P. SCHREIBER, J.D.

On Wednesday, federal officials in Miami announced indictments of 40 people in 20 cases for stolen identity tax refund fraud. This type of fraud generally involves situations in which personal identification information is stolen from an innocent person and used to submit a fraudulent refund claim.

The indictments included one scheme in which three defendants were charged with filing more than 5,000 returns using Social Security numbers of deceased taxpayers to claim fraudulent refunds totaling approximately $14 million, of which more than $6 million allegedly was received and deposited in the defendants’ bank accounts.

Many of the other indictments involved information stolen from living taxpayers, including one in which two employees of a health care provider allegedly stole patients’ personal information and sold it and one in which a husband and wife allegedly operated two tax preparation companies from which they filed false returns for unknowing taxpayers and deposited the fraudulent refunds in the other defendants’ accounts. One defendant was charged with obtaining more than stolen 26,000 Social Security numbers and providing them to co-conspirators to use in filing fraudulent tax returns.

U.S. Attorney Wilfredo Ferrer said in a prepared statement, “So far this year, we have charged a total of 79 individuals responsible for almost $40 million in fraudulent tax refunds obtained through identity theft.”

According to the Federal Trade Commission, Florida’s identity theft rate (for all types of identity theft), which is the highest in the United States at 178 complaints per 100,000 residents, is dwarfed by Miami’s rate, which is 324.1 complaints per 100,000 residents. Miami’s per capita rate of false returns based on identity theft was 46 times the national average. A recent Treasury Inspector General for Tax Administration’s (TIGTA) report on the scope of the IRS’s problem with stolen identity tax refund fraud determined that Florida had the highest rate of this type of fraud in the United States. For prior coverage, see, “TIGTA Recommends Steps for IRS to Reduce Fraudulent Refunds from Identity Theft,” Aug. 2, 2012.

Under authority granted in September by Justice Department’s Directive No. 144, the U.S. Attorney’s office for the Southern District of Florida established the South Florida Identity Theft Tax Fraud Strike Force, which includes members from IRS Criminal Investigation, U.S. Secret Service, FBI, U.S. Postal Service, the Aventura Police Department, the Miami-Dade Police Department, the North Miami Beach Police Department, and the Social Security Administration Office of Inspector General. 

Sally P. Schreiber ( sschreiber@aicpa.org ) is a JofA senior editor.

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