Identity Theft Tops List of Tax Scams
CNBC Senior Correspondent
For Angela Beasley of Miami, tax time seemed especially promising this year. After doing her taxes with Intuit’s popular TurboTax software, she found she was due a refund of nearly $5,000.
Anxious to get the money as quickly as possible, she paid the extra fee to file her return electronically. Then, she clicked “send.” After a delay, she said, an unusual message popped up on her screen:
“Your transmission didn’t go through,” it said. “A tax return with the same Social Security number has already been submitted — in other words, it appears you’re trying to e-file the same return twice.”
She says she was not quite sure what had happened until she went to work the next day and learned that many of her co-workers had had the same experience.
Beasley and her colleagues are among the nearly half-million taxpayers since 2008 who have been victims of identity theft.
“It feels like you have no control over what can happen with your finances or your personal information. Like you have no control over anything and that anything can happen to you,” Beasley said.
With most returns now filed electronically, all it takes is a Social Security number to file a return and claim a refund. And since many companies that provide electronic filing services offer instant refunds in the form of debit cards, fraudsters can be spending the money within days.
The IRS puts identity theft at the top of its “Dirty Dozen Tax Scams” for 2012. As of January, the agency had active identity theft cases in 22 states, and said its fraud filters caught 262,000 fake returns in 2011 compared with just 49,000 in 2010. But authorities know it is just the tip of the iceberg.
In Tampa, Fla., one of the earliest places where the fraud showed up, authorities say drug dealers and other hardened criminals have turned to tax identity theft instead because it is so easy, is far less risky, and, they apparently think, victimless.
“I’ve never seen individuals involved in a specific type of a crime that so readily admit what they’re doing. They don’t see anything wrong with it. Taking the government’s money is not wrong in their eyes,” said Tampa Police Chief Jane Castor, whose department has made several big arrests, including a sweep last fall dubbed “Operation Rainmaker,” in cooperation with the U.S. Secret Service and Postal Inspectors.
The operation netted 49 arrests, and authorities say it intercepted $100 million in proceeds from the fraud. But Castor says since then, the fraud has only grown.
“We thought that Operation Rainmaker may have slowed this down somewhat, but all indications are it is worse this year, 2012, than it was last year,” Castor said.
Nationwide figures appear to bear that out. The Federal Trade Commission, which is the main U.S. agency monitoring identity theft, says complaints in the category that includes tax refunds have doubled in the past two years.
On this tax day in New York, Manhattan District Attorney Cyrus Vance Jr. announced the indictment of a dozen defendants who allegedly set up a fake job placement web site in order to get Social Security numbers and other identifying information from some 300 victims. They are accused of using that information to obtain more than $450,000 in refunds from the IRS.
By targeting the unemployed, authorities allege, the defendants were able to garner a pool of individuals less likely to have earned income to report to the IRS. That way, returns filed in their names were less likely to raise suspicion.
Elsewhere, authorities have found “cheat sheets” in jails, where criminals share information about where to get Social Security numbers and how to best pull off the fraud.
For victims like Angela Beasley, finding out that her electronic tax form would not go through has been only the beginning of a long and frustrating ordeal.
She says she started with the IRS, which told her to file a return by mail, along with Form 14039, an identity theft affidavit. Then, she says, she was told to call the police.
“I called my local police office, they directed me to call another local police office. I called them and they said, ‘No we don’t take those reports, we don’t report that particular identity theft because it’s so rampant and it’s happened to so many people,’ that they’re overwhelmed and they can’t even deal with it, just call the IRS. But the IRS then asks you if you have a police report,” Beasley said.
Beasley says she has been told it can take anywhere from six months to two years to get her refund back. But that is just the first of her concerns.
“If I made $50,000 and this person has submitted a record to the IRS that I’m making $75,000 a year and threw me into another tax bracket … if I was applying for a student loan or maybe discounted health care this could probably affect me,” she said.
Beasley has channeled her frustration into a blog, “Hacked by TurboTax,” though she acknowledges TurboTax is not to blame for her situation — something a TurboTax spokeswoman is quick to point out as well.
“The blog title is clearly misleading,” Colleen Gatlin wrote in an e-mail to CNBC. “TurboTax has not been hacked nor have identities been stolen from TurboTax at any time.”
Nonetheless, she said, the company is working closely with the IRS to detect and prevent fraud in the face of a “marked increase” in the activity this year.
Castor says it is up to the IRS to tighten its systems. “We can’t investigate our way out of this,” the Tampa Police Chief said.
The IRS says it is working on it. “The IRS takes this issue very seriously and we continue to expand on our screening process in order to stop fraudulent returns and protect innocent taxpayers,” the agency said in a statement.
The agency says it stopped $1.4 billion in refunds from being sent to identity thieves last year, and it is working to speed up the process of resolving cases, a situation complicated by strict privacy laws surrounding tax returns.
The main federal agency dealing with identity theft is the Federal Trade Commission. But by law, the IRS is prohibited from sharing information about individual tax returns — fraudulent or not — with the FTC.
Legislation pending in Congress would toughen penalties for tax return identity theft and broaden the definition of victims, but protect your online identities. Guard your Social Security number, and beware of so-called “phishing” scams, where criminals attempt to access your personal information through official-looking e-mails.
The IRS has posted a list of tips here.
Tell us your story! E-mail us: investigationsinc@cnbc.com
Better Qualified Teams Up With Identity Theft 911
Better Qualified has partnered with Identity Theft 911 to provide identity theft protection, management and resolution services as coverage enhancements to customers. This new program provides Identity Theft 911’s LifeStages™ Identity Management services to customers and their families at no charge, including 24/7 dedicated access to a fraud specialist for personalized support with proactive assistance and identity theft recovery services.
SCOTTSDALE, Ariz. June 14, 2011 — Identity Theft 911, the nation’s premier identity management and data risk management services provider, today announced that Better Qualified, a leader in credit restoration and identity theft services, has chosen the company to offer identity protection and identity theft resolution services to customers. Better Qualified customers and their family members now benefit from Identity Theft 911’s LifeStages™ Identity Management services during the times in life when they are most susceptible to identity theft.
According to the 2011 Identity Fraud Survey Report by Javelin Strategy & Research, the average consumer out-of-pocket cost due to identity fraud increased 63 percent from $387 in 2009 to $631 per incident in 2010. Along with the higher cost of resolution fees, the average time spent resolving identity fraud issues increased from 21 to 33 hours, emphasizing the need for better consumer education and resolution services. Recognizing this trend, Better Qualified customers have the convenience and benefit of a trusted advisor they can turn to for help resolving crises in credit and identity theft.
“Knowing that your credit report is being monitored for any changes, while also having access to a fraud specialist with a simple phone call is priceless.” said Paul Oster, CEO, Better Qualified. “We are in the business of protecting and restoring clients’ credit, so our partnership with IDT911 brings additional value to our customers with a resource to help fight the fastest growing crime in America.”
Identity Theft 911 fraud specialists provide high-touch service to victims from the initial call through case resolution. Their expertise covers a range of issues, from proactive measures that provide protection to resolution in the case of true identity theft and account takeovers. The fraud specialists work one-on-one with victims and are available 24 hours a day, seven days a week until resolution is complete.
“Identity theft continues to rise and has become more complex, leaving victims alone in trying to restore their reputation and identity,” said Matt Cullina, CEO of Identity Theft 911. “With an already strong service offering, Better Qualified delivers even greater value to its customers with identity management education and resolution services.”
About Identity Theft 911
Identity Theft 911 is the nation’s premier identity theft and data breach management, resolution and education service. The company serves 13 million households across the country and provides fraud solutions for a range of organizations—including Fortune 500 companies, the country’s largest insurance companies, corporate benefit providers, banks and credit unions and membership organizations. Since 2005, the company has helped more than 150,000 businesses deal with data breaches. For more information, visit www.idt911.com.
About Better Qualified
Better Qualified, LLC (BQ) is a national Credit Repair Organization, with headquarters in Eatontown NJ. BQ is an accredited business with an “A” rating according to the NJ Better Business Bureau. Founded in 2006, BQ has helped thousands of individuals establish and improve their credit ratings. BQ provides a free credit consultation and analysis to determine if a person is qualified for its programs.
Identity Theft Just Keeps Getting Worse
Approximately 15 million United States residents have their identities used fraudulently each year with financial losses totalling upwards of $50 billion.
That means approximately 7% of all adults have their identities misused with each instance resulting in approximately $3,500 in losses.
Close to 100 million additional Americans have their personal identifying information placed at risk of identity theft each year when records maintained in government and corporate databases are lost or stolen. These alarming statistics demonstrate identity theft may be the most frequent, costly and pervasive crime in the United States.
The sophistication level of professional identity thieves continues to grow along with the methods they develop. From individually tailored phishing and vishing scams, to increasingly successful hacks of corporate and government databases, to elaborate networks of botnets designed to hijack millions of computers without any trace, there is an ever-increasing threat to all Americans.
At the same time, basic methods of identity theft continue unabated. From stealing wallets and purses, to dumpster diving and stealing mail, to the use of pretext and social engineering to deceive customer call centers into releasing personal account information, the original methods of identity theft still work.
One of the new methods of identity theft is coming from an everyday item that sits in your pocket. The new wireless technology that is built into credit cards and so- called speedpassses can be scanned while it is in your pocket or even your handbag. While you are walking down the street or getting out of your car, thieves just have to pass by you with a receiver and steal your information. Watch the video at the top of the page
As the methods used to perform identity theft expand, so do the types of accounts and services being stolen by identity thieves. Credit, debit, checking and saving accounts are no longer the only targets. Identity fraud has grown to include theft of cell and landline phone service; cable and satellite television service; power, water, gas and electric service; Internet payment service; medical insurance; home mortgages and rental housing; automobile, boat and other forms of financing and loans; and, government benefits. Identity thieves will also use stolen identities to obtain employment and to deceive police when arrested.
Quite simply, every individual or business is vulnerable to attack when it comes to personal or corporate information, products and services.
ID Theft On Vacation
On vacation? Beware of ID theft
Don’t let your dream trip turn into a nightmare. Follow these 10 steps to protect your personal information when you’re away from home.
It’s easy to become a victim of identity theft while traveling, whether for work or pleasure. Follow these tips to protect yourself:
1. Let your credit-card company know if you’ll be traveling (especially if you’re leaving the country).
Financial institutions’ fraud departments are becoming more vigilant about any unusual activity on your card, which can be a great way to detect a problem. But if you’re away from home when the bank calls to verify the charges, you could end up stuck with a frozen account while you’re out of town. Avoid the hassles and notify your bank before you leave home.
2. Don’t automatically call back the phone number that claims to be from the bank.
If you get a phone call or e-mail about suspicious activity on your card, don’t automatically call back the number on the message. This is a common ploy by identity thieves to capture personal information. Instead, call the customer service number on the back of your credit card. If the call was legitimate, your credit card issuer will be able to connect you to the appropriate department.
3. Secure your mail while you’re gone.
If you’ll be gone for a while, have a trusted neighbor or friend pick up your mail every day or stop your mail at the post office. Your mail can be a treasure trove for criminals — it can contain your credit card numbers and other personal information that could lead to identity theft. “There’s no greater magnet for burglars than a mailbox that is overflowing with mail,” says Adam Levin of Credit.com and Identity Theft 911. And don’t announce the dates of your travel on your Facebook page. That’s like issuing an open invitation to thieves.
4. Weed out your wallet.
Tourist destinations are often a haven for pickpockets, so go through your wallet and take out any unneeded credit cards and personal information before you leave. Don’t carry your Social Security number in your wallet and take only the credit cards that you know you’ll need. Also, make copies of all of your important documents, such as your passport, driver’s license, health insurance card and tickets, so you’ll have access to the information if your wallet is stolen, advises Levin. Leave the copies with a trusted family member or scan them into an encrypted file on your computer. Further, keep a list of contact numbers for your credit card company and bank with you, so you can reach them easily if your wallet is stolen or you have any trouble with your account.
5. Be wary of generic ATMs.
Banks have been reporting an increase in ATM skimming incidents. This is when thieves install a card reader in an ATM to capture your account information and PIN, so they can later steal from your account. Levin recommends sticking with bank ATMs at a branch to be safe. “There’s a greater level of security,” he says.
6. Check your accounts regularly for suspicious activity.
“Spend a few minutes online every day looking at your bank and credit card accounts, and make sure every transaction is yours,” says Levin. This is a good idea any time, but it’s particularly important when you’re out of town, where you could miss a call from your bank about suspicious activity. Some banks also offer a service that can notify you by text message or e-mail whenever a transaction above a certain size is made on your card.
7. Be careful with hotel computers.
Don’t access your accounts or personal information on public hotel computers, which could have software that logs keystrokes and records your passwords and account numbers. And be very careful when using an unsecure wireless network.
8. Don’t leave personal information lying around in your hotel room.
Keep your credit cards and other important information with you or lock them up in the hotel safe, says Levin. Leave your checkbook in a safe place at home if possible. Safeguard your laptop computer, too, especially if it has account information that is not encrypted.
9. During long absences, freeze your credit.
If you’ll be traveling for a long time and won’t be able to check your accounts regularly for suspicious activity, consider putting a freeze on your credit report. A freeze prevents potential lenders from accessing your credit report without your authorization, which can prevent identity thieves from opening new accounts in your name. You can still make charges to your current cards without unfreezing your account. It generally costs $10 at each credit bureau to freeze the account and $10 to unfreeze it. For this precaution to be effective, you must freeze your credit report at all three credit bureaus. Contact Equifax, TransUnion and Experian individually.
10. Be vigilant after you return home.
Identity thieves are known for their patience, and it can take them a long time to pounce. Check your credit report at AnnualCreditReport.com for any suspicious activity — you can receive one free copy of your report from each of the three credit bureaus every 12 months, and you can stagger your requests so you get one copy every four months. This is a good move for everyone to do, even if they haven’t left home in a while.
This article was reported by Kimberly Lankford for Kiplinger’s Personal Finance magazine.
Some Tips That Can Help
1. Be careful at ATMs and stores where you use your card. It isn’t difficult for someone to see the pin number your punch in.
2. Make sure you put your credit card receipts in a safe place. Very few credit card receipts list your full account numbers and expiration dates, but you may run into a situation where it does. It may be something as innocuous as a small charity function using an old credit card machine. Stay on your guard no matter where you use your card.
3. One of the cheapest ways to protect yourself is with a shredder. Shred everything, including credit card receipts (after you’ve reconciled your bill), old bank statements, medical statements, everyday bills, and pre-approved credit card offers. Any document that has personal financial information can be an open door . As an added bonus, if you have a fireplace, use the shredded paper as kindling. Then you definitely don’t have to worry about it.
4. Do not provide your Social Security number, bank account number or credit card number to anyone who contacts you through telephone solicitation. You may think you are talking to someone reputable but acting is one of any identity thief’s skills.
5. Monitor your credit accounts carefully, so you’ll know if a bill’s missing or unauthorized purchases have been made. Close out unused credit cards and then shred them.
