Feds Call Identity Theft And Tax Fraud An Epidemic

MIAMI (CBS4) – It’s a national problem that could be leaving millions of taxpayers wondering this tax season, what happened to their refunds. And nowhere is it a bigger problem than in the Miami-Ft. Lauderdale metropolitan area.

According to a Federal Trade Commission report just released, South Florida had more complaints about identity theft than any other place in the United States in 2011.

It’s a national problem that could be leaving millions of taxpayers wondering this tax season  what happened to their refunds. Federal prosecutors tell CBS 4 News it could be costing Uncle Sam Billions of Dollars this year alone. It’s tax refund fraud. And it’s the latest identity theft exploding across the country thanks to high-speed internet connections and state of the art tax filing programs.

Sunrise resident Vanessa Dowe recently tried filing for her tax refund. She found out somebody else got it using her social security number. The Broward single mom explained ” I got an alert saying my taxes had already been filed and I had not filed them at all. I started crying, I was really upset”

The General Accountability Office, or GAO, reported that in 2008, Uncle Sam got 52,000 tax refund complaints. Just two years later, it skyrocketed to about 250,000. The Federal Trade Commission says it’s now getting about 50,000 ID theft complaints a week, mostly tax refund scams.

The U.S. Attorney for South Florida, Wifredo Ferrer,  told CBS4 Chief Consumer Investigator Al Sunshine, ” It is now an epidemic, that is how I describe it. It is viral, it is spreading not only here in South Florida, but throughout the country.  And we’re dealing with hundreds of millions of dollars if not billions of dollars of loss, to the IRS and to the government.

People describe it as cocaine on a card, it is easy to get. it spreads, it’s a lot of money.  people are having parties in their homes and training others on how to commit this fraud.

It turns out this latest cyberscam relies on just three things: tax software to electronically file multiple returns. Personal taxpayer information like names and social security numbers. And an electronic filing number from the IRS.

And CBS 4 Investigates found the kind of software to pull it all off is even available online for free. Cyber-law specialist Brad Gross, a Weston Attorney, blames Congress and the IRS for this latest identity theft epidemic. He said lawmakers demanded the IRS make it easier for taxpayers to get refunds electronically. But he charged the agency obviously did not include enough safeguards to keep cyber-scammers out of it’s computers.

“A cyberscammer just needs a little bit of motivation, a little bit of creativity and they can easily conduct this type of scam,” said Gross.

Sunshine asked Gross how hard is it to get this kind of software?

“It’s simple. It’s a perfect storm of a scam at taxpayers expense,” he said.

To avoid becoming a victim, consumer protection experts say don’t give any personal information to anyone on the phone or over the internet. Shred all your private records before throwing them out. And file your tax return as soon as possible to find out if anyone else has filed in your name and immediately contact the IRS if they have.

Federal Prosecutors have put together several special enforcement teams of investigators from the Secret Service, FBI and local agencies to focus on this growing problem.

There are several proposals expected to be introduced in Congress to try to shut the loopholes. But they are not expected to offer much help anytime soon to the growing number of victims here and across the country who will be finding out somebody has already filed a tax return in their name, and stolen their refunds.

For information, contact the IRS at:



Click Here To Read the FTC Report -cy2011


  • Alex

    This is only an “epidemic” because there are no safeguards in place for efiling.

  • Jennifer Tramontana

    Prepaid cards are an overwhelmingly positive additional to the financial tools at consumer’s disposal. The cards are available in more than 200,000 retail locations and bank branches with pricing that is often lower than other financial tools. They are particularly appealing to the 60 million Americans who are unbanked or underbanked, who have limited or no access to bank branches in their neighborhoods or cannot qualify for checking accounts.
    Like any payment system, prepaid cards are susceptible to abuse and misuse and, the use of prepaid cards in connection with tax return fraud was identified as concern during the prior tax return processing season. The industry has acted aggressively to address this problem with a Prepaid Anti-Fraud Forum (PAFF) that brings together leading practitioners, and collaborates with law enforcement, establishes leading practices, and hosts educational forums for members to learn from guest experts. To combat tax fraud the PAFF solicited input from industry participants and, prior to the beginning of this tax return processing season, compiled a confidential handbook discussing various fraud mitigation strategies. This confidential handbook has been shared with issuers, program managers and processors of prepaid cards.
    The industry efforts have so far resulted in over $1Billion of value loads to prepaid cards being returned to the IRS based on attempted fraudulent tax refunds.
    The PAFF is developing a close working relationship with the IRS Criminal Investigation Division, the Department of Justice, and the FBI to enable more effective information sharing to prevent the use of prepaid cards in tax refund fraud.
    The vast majority of people who choose to receive their tax refund on a prepaid card are law abiding citizens looking for a timely and cost-effective option to receive their money so we must balance the ability to meet their needs while continuing to improve efforts to combat fraud.
    Jennifer Tramontana, NBPCA

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