Florida dominates tax return theft wave list

McClatchy News ServiceApril 11, 2013 

WASHINGTON -- An epidemic of tax-related identity theft continues to plague the Internal Revenue Service despite efforts by the agency and law enforcement officials to combat the fraud, witnesses told a Senate panel Wednesday.

"We are losing $5 billion each year to this crime, and now the problem is getting worse," said Sen. Bill Nelson, D-Fla., chairman of the Senate Special Committee on Aging.

Criminals use stolen personal information to file fraudulent tax returns, usually in January, before the real taxpayers have a chance to file. By the time the victims send in their returns, it's too late: The IRS already has mailed refund checks to the identity

thieves. It can take months -- even years -- for the IRS to untangle the mess and send the taxpayers refunds they're owed.

Nine of 10 U.S. cities hit hardest by the scam are in Florida. The Miami metropolitan area tops the list with 35,914 cases of tax-related identity theft reported last year and the highest per capita rate of complaints, 645 per 100,000 residents.

Miami was followed by Atlanta, which had 12,992 complaints, Tampa with 9,805 and Orlando with 4,991.

Nationwide, tax-related identity theft cases surged 650 percent from 2008 to 2012. In 2011, thieves filed 1.5 million undetected fraudulent tax returns and received $5.2billion in refunds, according to an audit last year by the Department of the Treasury inspector general.

Witness Marcy Hossli, 57, of Lake Worth, has been a victim of identity theft through tax fraud three years in a row.

"I should never have to go through anything like this, nor should anyone else," Hossli said. "I feel violated. It's hard to concentrate on work. I am stressed constantly."

Hossli told senators she still is waiting for her 2012 tax refund. She has cancer and owes $4,000 in medical bills. "I really need the money," she said.

Senators expressed frustration that the IRS hasn't been able to do a better job at detecting fraud even though criminals often use the same addresses to file multiple returns.

Republican Sen. Susan Collins of Maine said thieves used the same address in Lansing, Mich., to file 2,137 tax returns, and they received $3.3million in refunds. An address in Chicago was used to steal $900,000 in refunds through almost 800 fraudulent returns, Collins said.

"Criminal gangs have figured out that it's cheaper and easier for them to steal taxpayers' identities and hijack their refunds than it is to traffic in drugs, rob banks or fence stolen property," Collins said.

"The IRS has an obligation that obviously they're not meeting," said Sen. Claire McCaskill, D-Mo. "How in the world can there not be a system in place that the IRS could not catch that they're sending 2,000 refunds to the same address?"

One day before Washington's hearing, a Miami federal jury convicted two brothers, Earnest Baldwin, 36, and Earl Baldwin, 42, of a $1.7million tax-refund scam involving the stolen identities of more than 1,000 people -- including the report cards of Miami-Dade high school students and a local agency's records of disabled persons. Earnest Baldwin also possessed about 40 pre-paid debit cards loaded with IRS tax refunds in some of the victims' names.

The jury's convictions of the Baldwins Tuesday followed earlier guilty pleas by two of their co-conspirators, Lineten Belizaire, 22, and Marckell Steward, 21, both of Miami, to fraud and identity theft charges.

Belizaire's prosecution gained notoriety because he had already been charged in connection with a 2012 triple murder in Broward County. He is awaiting trial.

Tax-refund thieves commonly target senior citizens, low-income people and students who might not be required to file returns.

The audit by the Treasury Department inspector general estimates 76,000 senior citizens likely were victims of tax fraud identity theft in 2010 resulting in $374 million in fraudulent tax refunds.

Victims often have their identities stolen by corrupt employees at nursing homes and hospitals, Kathryn Keneally, assistant attorney general for the Department of Justice's tax division, said in testimony before the committee. In other cases, criminals take names from public death lists to file tax returns, she said.

"For the public the risk is clear," Keneally said. Such crimes "can and do arise in any setting where the lure of fast money puts at risk personal identifying information, including at state agencies, student loan providers, the military, prisons, companies servicing Medicaid programs -- the list is growing all too long."

Postal workers have been robbed and in one case killed in order to steal refund checks, she said.

Prosecuting tax-refund identity theft is a national priority, she added.

Legislation Nelson introduced this week would increase jail time and fines for people convicted of tax-related identity theft and direct the IRS to close identity theft cases within 90 days. Last year, it took an average of 196 days for the IRS to close such cases.

The delays are unacceptable, Nelson said. He said identity theft victims shouldn't have to wait six months for refunds, much less two years, as at least one woman in Parkland had to do.

"Many Americans rely on getting those tax refunds back so they can pay their bills," he said.

Nelson's bill, co-sponsored by fellow Democratic Sens. Dianne Feinstein of California and Charles Schumer of New York, also would ensure victims don't have to explain their plight to different IRS employees every time they contact the agency.

Instead, the IRS would give each victim a single point of contact to help track the case.

Other provisions include restrictions that would make it harder for thieves to load stolen refunds onto prepaid cards, language that allows identity theft victims to opt out of electronic filing and prohibitions on printing Social Security numbers on Medicare ID cards and communications.

-- Miami Herald staff writer Jay Weaver contributed to this report.

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