A Center Grove area woman returned from spring break to a letter from the Internal Revenue Service wanting to verify her identity.
Her tax return was flagged, putting a hold on a $2,600 refund.
The problem was, she and her husband hadn’t filed their taxes yet, according to a police report. Scammers had stolen their information, filed a fraudulent return and were trying to collect a refund using their identity.
This year, more than a dozen residents in Johnson County have reported similar instances of tax fraud to the sheriff’s office. Fraud and scam reports are common, but this kind of fraud and this amount has never happened before, Sheriff Doug Cox said. There could be more people across the county, including some who don’t even know yet that their identities were stolen.
Almost all the reports are similar. Either someone went to file a tax return online and got an error message that it was already filed or got a letter from the IRS asking for identity verification because of a suspicious return filed. Several victims noted they have Anthem insurance, which was hacked in February and had data for 80 million customers stolen. But an Anthem spokesman said that security breach likely isn’t connected.
Tax fraud isn’t like a common phone or email scam, where a person who gets scammed is giving up their information to a person or group they think is legitimate, Cox said. Residents who are the victims of this recent wave of tax fraud don’t know how their information was stolen, and it could be the result of hacks or security breaches where you might not even know your information was taken, he said.
The reports started coming in as the tax-filing deadline, which was Wednesday, approached. Cox said he suspects that people who filed early might not have had issues because they got theirs done before scammers could file fake ones. But he’s worried that more people could face this problem if scammers begin earlier next year, he said.
“This is more prevalent this year,” Cox said. “This has pretty much been a daily report. In the last two weeks, we had averaged one of these reports every day. There hasn’t been a day this week or last week I haven’t sent one.”
Identity theft can be costly and take weeks to repair. If scammers have access to your Social Security number and other information, they could use it to try to open bank accounts, credit cards or loans in your name or get fake IDs. People who have their identities stolen often have to go through a lengthy process of closing accounts and recouping lost money, repairing damaged credit and replacing or getting new IDs. Local police aren’t equipped to help in most identity theft cases, since scammers may be multiple states away or even international, Cox said.
The federal government paid out about $5.2 billion in fake refunds last year, while preventing about $22.4 billion in fraud, according to the Government Accountability Office. Government estimates show that number could sharply increase due to staffing and funding cuts at the IRS and an increase in scammers trying to cheat the system.
In 2014, Indiana issued about $4 million in fraudulent refunds but was able to stop about $88 million in fraud, Indiana Department of Revenue spokeswoman Amanda Stanley said. About 3.5 percent of all tax returns filed in the state last year were fraudulent, she said.
Locally, police can’t do much more than take a report, which people can use as a reference in the long and difficult process of trying to defend or change their personal information after it’s been stolen, Cox said. Meanwhile, taxpayers are left to coordinate with the IRS and Indiana Department of Revenue to identify and void the fake returns and then file real ones.
If your identity has been stolen, a scammer could file a fraudulent tax return fairly easily. A person can file a 1040EZ form with just a name, address and Social Security number, for example.
Another Center Grove area resident told police that his accountant tried to file his return online, but it was rejected because it had already been filed. His return included personal information for himself, his wife, his son, daughter and grandson. A Clark Township resident ran into the same problem when filing his return, when a return had already been filed under his Social Security number, as well as his wife’s.
But exactly how the scammers got the information is unclear, and police aren’t sure why it’s been more prevalent this year.
Many of the victims told police they have Anthem insurance and think their information might have been stolen in the large hack in early February. Information stolen in that massive hack included names, birth dates, addresses, Social Security numbers and employment information.
Anthem’s Indiana spokesman Tony Felts said that, although the company’s information had been compromised, the FBI is continuing to investigate what happened to the data and there is no sign that the information has resurfaced and is being used for fraud.
“In working with the FBI to date, we have found no evidence that those who attacked Anthem’s database have shared or sold any of our members’ data. There is no evidence that fraud has occurred against our members including fraudulent tax returns. That’s what the FBI is telling us at this point,” Felts said.
Anthem has been providing free identity protection services for customers who are worried that their information was taken and could be used fraudulently, Felts said. Customers can sign up for free identity theft repair assistance or credit monitoring for two years, which will notify them if someone is trying to open fake accounts and help fix any fraud and recover any financial losses, he said.
People who are victims of identity theft and tax fraud need to immediately notify the IRS or the Indiana Department of Revenue to verify their information and work on submitting a legitimate return. Residents also should contact the Indiana Attorney General’s Office, which can assist with identity repair beyond just your taxes.
The IRS or state may catch a fraudulent return using your name and prevent a refund from being paid out, but that’s a sign that your information has been compromised, and you’ll need to take steps to protect your identity.
The Indiana Department of Revenue has internal checks that try to catch suspicious income tax returns before a refund is issued, Stanley said. If something unusual is flagged, residents could receive a letter in the mail asking them to take a four-question identity verification quiz, which will check their information, she said.
If you receive one of those notices, it doesn’t necessarily mean you’ve been the victim of identity theft, she said.
If you discover someone has filed a fake state tax return before you, you’ll need to contact the Indiana Department of Revenue and speak with a caseworker, who will help you file your return, Stanley said. Even if the state paid out a fake refund to a scammer, you’ll still be able to collect a refund if one is due to you, she said.
The same applies for a federal refund, but you’ll need to work with the IRS to file your taxes correctly, and it might take several months before you receive a refund check.
More than a dozen residents have reported that someone fraudulently filed a tax return using their personal information. Here’s what to do if you’re a victim and some ways to protect yourself:
Federal tax fraud
Respond immediately to any IRS notice; call the number provided.
Complete IRS Form 14039, Identity Theft Affidavit. Use a form at IRS.gov, print, then mail or fax according to instructions. Continue to pay your taxes and file your tax return, even if you must do so by paper.
If you previously contacted the IRS and did not have a resolution, contact the Identity Protection Specialized Unit at 800-908-4490.
File an identity theft report with local law enforcement. File an identity theft complaint with the Federal Trade Commission at identitytheft.gov or the FTC Identity Theft Hotline at 877-438-4338.
Indiana tax fraud
Contact the Indiana Department of Revenue so that a correct return is filed and process. Call 232-2240, explain the situation and you’ll be connected with a representative specializing in identity theft.
You should also contact the Indiana Attorney General’s Office at 800-382-5516, which can assist with stopping further abuse and help you repair your identity after it’s been stolen.
Local police have noticed a sharp increase in the number of tax return fraud cases occurring in the county. People who go to file their taxes are being notified that someone already has filed a return with the information. Here are some statistics about tax return fraud:
$5.2 billion: Fraudulent refunds issued by the federal government last year
$22.4 billion: Refund fraud that was caught by the IRS before being paid out
$4 million: Fraudulent refunds issued by Indiana in 2014
$88 million: Fraud caught by Indiana before being paid out
3.5 percent: Percentage of all 2013 Indiana income tax returns that were fraudulent
3,300: Taxpayers who have been identified as victims of fraud so far this year
SOUCES: Government Accountability Office and Indiana Department of Revenue