Identity theft nets some tax refunds, stimulus checks
March 19, 2009 (CNN)
Thousands of taxpayers across the country will not be receiving their refund or stimulus checks, because criminals have stolen their Social Security numbers in an identity theft scam, CNN has learned. Moreover, some victims will not learn about the identity theft until the IRS questions them about income in their name.
Nina Olsen is a national taxpayer advocate for the Internal Revenue Service. Olsen, whose independent office is set up to help taxpayers, said her office fielded several thousand complaints this year connected to the scam. The Federal Trade Commission reported that approximately 50,000 taxpayers complained about tax fraud and employment-related identity theft during 2006, compared with 18,000 in 2002.
"It's a huge nightmare," Olsen said. "Basically, their life can be taken over by just about every approach, trying to prove that they are who they are and other people are not. And when you think about how central the Social Security number is to banking, to credit, to school applications, for financial aid, just for everything you can think of -- plus your taxes -- it has a significant impact on a person's life."
Sen. Max Baucus, D-Montana, said it takes the IRS an average of about a year "to sort out who is the real taxpayer. In the meantime, the victim's tax accounts get frozen," Baucus, the chairman of the Senate Finance Committee, said in a written statement. "The IRS issues no refund. The money that the taxpayer was planning on doesn't come. The taxpayer waits in tax limbo, for months and months." Baucus, who led a hearing into the issue in 2008, said other taxpayers don't learn that they are victims of identity theft until years later.
Sen. Chuck Grassley, the ranking Republican on Baucus' committee, said the IRS doesn't do enough to combat tax-related identity theft. He said the IRS does not prosecute, "and that's not very helpful. It sends a signal that you get a free pass if you're using IRS instruments."
But IRS spokesman Dean Patterson called preventing identity theft "a top priority" for federal tax collectors and said, "We are committing significant resources to address the challenges posed in protecting taxpayers' identity information."
The IRS said it "vigorously prosecutes identity thieves to the fullest extent of the law using tax-related laws that result in the toughest penalties possible." The agency said it was unable to provide details of how many cases it prosecuted, however.
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