IRS Tax Refund Fraud Expected to Hit Hard Again in 2016
After a surge in tax-refund fraud complaints in 2015, security experts warn that more needs to be done to augment the Internal Revenue Service's detection and prevention methods.
The Internal Revenue Service, the agency that collects more than $3 trillion in revenue for the United States, is under siege by cyber-criminals and fraudsters. In 2015, a popular scam—where criminals filed fake income-tax reports to collect fraudulent refunds—became even more common. So-called tax-refund fraud accounted for 45 percent of reported identity-theft cases, up from 30 percent in 2013, according to the Consumer Sentinel report published annually by the U.S. Federal Trade Commission. The crime pays well. The IRS estimated that, by filing tax documents using the identities of real people, fraudsters collected at least $5 billion in 2013 from the agency. More recent numbers are not available. "From an identity thief's point of view, [tax-refund fraud] is great," John Breyault, vice president of public policy for telecommunications and fraud for the National Consumers League, told eWEEK. "They wait with bated breath for the tax-filing season to open and they start filing fake returns and if the IRS does not catch them when they are filed, it won't be detected until the actual individual files their tax return weeks, if not months, later."
The blossoming of the tax-refund scam comes from the intersection of three major trends: increasing taxpayer demand to file their returns over the Internet, the widespread leakage of personal information that cannot easily be changed, and the low risk of being prosecuted for the crime. The massive profit that criminals are able to realize, even with moderate success, makes the crime even more alluring.