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Have you gotten your income tax refund yet? Even though I know I’m essentially just getting my change back from the government, my tax refund always feels like a present that arrives in the mail. I usually end up squandering it as if were my yearly “bonus” from the government. However, for some people a refund check really is a present–that is, they are actually getting a refund on taxes that they didn’t pay in the first place. Yes, I’m talking about identity theft via fake tax return. Thankfully, these criminals usually don’t get away with it.  They file a fraudulent return, but are caught as soon as the real person files their return and the IRS is notified of a redundancy in the system. Generally, stealing someone else’s tax return is pretty hard to get away with, unless, the taxpayer happens to be dead.

The IRS recently discovered that they paid out refunds on the 2009 tax returns of 5,108 dead U.S. citizens.  During 2010′s tax refund season, the IRS refunded $12.1 million to a group of criminals who were collecting the refunds of people who had died that year or the year before.   While this would have been avoided if the families of the deceased had filed a return and tried to collect the money, most of them did not bother or were simply too distracted with getting other “death”-related  affairs in order.   This is where scammers, confidence men and frauds can strike gold.  If two redundant returns are not filed,  no red flags will go up to trigger an IRS investigation.

But identity theft is still tricky business, right? Don’t you need tons of top-secret information about someone, like their social security number, in order to steal their identity?  This kind of information is safeguarded even after someone dies, right? Wrong. Go ahead and Google “Social Security Death Index” and click a few of the top results.  Or, try www.ancestry.com; I used this site to  look up my grandmother who passed away in 1998. I entered only her first and last names.   About 10 matches came up, and I found her four people down the list. The site listed her full name, date of birth, state and town of residence, date of death and social security number right there on the Internet!  Do you think sites like this may “facilitate” fraud?  Duh!  Clearly, even if  this is not what such sites had in mind,  I’d say their listing the social security numbers of the all  US persons who have died since 1962 and making them available to anyone with an internet connection clearly has given a lending hand to the fraudulent-minded.

Even armed with all of this information, one would assume it would still be difficult for criminals to  actually file over 5,000 tax returns. I mean even if you’re going to e-file, you would still need to obtain individual Electronic Filing Identification Numbers (the number that allows you to access online tax- filing databases) for each return, right? Evidently not.  Each and every one of the 5000+ fraudulent returns was filed using the same identification number, assigned to a single person; the IRS’s fraud-detecting software didn’t pick up on it. Ahem, Uncle Sam, maybe it’s time for some new software.

So where’s the money now? Investigators already suspect that over 300 accounts at 9 different banks are holding some of the proceeds from this scam. However, the government has thus far  only taken legal action against 2 of the 9 banks (Bank of America and JP Morgan Chase) who, combined, hold a little over $1 million of the stolen $12.1 million. Well, we’re a twelfth of the way there.  But, what about the name attached to the Electronic Filing Identification Number?  Shouldn’t that person be able to give the government answers? It turns out the the I.D. number belongs to some guy in Florida who made a quick grand by applying for the number and turning it over to the scammers. The ring’s masterminds are still at large and, as of May 6th, no criminal charges have been filed in this case.

In an official statement issued earlier this year, the IRS boasts that this year alone it stopped 117,000 cases of identity theft, thus preventing $582 million from being stolen, and that the issue of identity theft is always a “top priority” for them.  Well of course it is, unless you’re dead.

image: spaces.umbc.edu