tax news, security — May 19, 2014

G-men on Hunt for Fraudsters and Thieves

by Bob Williams

identity theft

When I was growing up, I remember seeing a newsreel about then-FBI Director J. Edgar Hoover and how he had gotten tough with organized crime back in the 1930s with an army of “G-men,” as his agents were called. The black-and-white newsreel showed a gloating Hoover wielding a Thompson machine gun, shooting up some bootlegger’s barrels of beer.

Prohibition was later repealed, of course, but Hoover, while a very complex personality, did have one over-reaching impact: He brought federal law enforcement into the modern age with cutting-edge techniques and forensic tools.


Today’s federal agents have a new threat to fight. Unlike the gangsters of the 1930s, this threat is relatively invisible. Whereas organized crime was headquartered in a few well-known American cities, this new crime wave comes from every direction – even from overseas. And the money scammed by the current crop of neo-criminals makes Al Capone’s take look like chump change.

The crimes du jour are identity theft and income tax refund fraud. Many times, these go hand-in-hand; a taxpayer’s identity is stolen so that the thief can either sell the identity on the black market – or file a fraudulent income tax return claiming thousands of dollars in refunds.

The current state of affairs has been laid out plainly by the head of the Internal Revenue Service, Commissioner John Koskinen: “Identity theft is one of the fastest growing crimes nationwide, and refund fraud caused by identity theft is one of the biggest challenges facing the IRS.”

The commissioner is quick to add that the IRS is giving its Criminal Investigation (CI) unit all the resources it can to help combat the threat. And to be sure, the enforcement numbers are increasing. In 2011, for example, there were just 276 IRS investigations into identity theft or income tax fraud, with 80 people sentenced. In 2013, that number ballooned to 1,492 investigations and 438 fraudsters put behind bars.

The Boston Globe’s Michael Kranish (IRS Overwhelmed by Identity Theft Fraud) interviewed Commissioner Koskinen, and found that while the IRS has put electronic measures in place to catch more fraudulent returns, Koskinen admits, “The problem has exploded.”

And though prosecutions are certainly up, new fraudsters surface the minute others are locked away.

Who ARE These Guys?

Kranish and The Globe found that all the wrong people are ready and willing to steal your identity. Gangs, drug dealers, jail prisoners – even prisoners in foreign jails – have all been found filing fraudulent income tax returns. But the list doesn’t stop with the known bad guys: nursing home workers, state employees – even some paid tax preparers – have also caved in to the lure of easy money through fraud.

The typical tax cheat plays the odds; he sends in scores, if not hundreds, of fake returns, on the premise that some will get refunds even if the majority are caught by the IRS. And it works.

It works, because they use the Social Security Numbers of real people; some are regular taxpayers, some are deceased, some are children (many times as young as age 5, according to the IRS), still others are people who may not be required to file an income tax return in the first place.

So, Do We Just Go Broke?

Not exactly. Some people – including Koskinen – have pretty good ideas about how to counter the wave of fraudulent returns. From the deceptively simple to the technologically advanced, these ideas hold the hope of a return to sanity in income tax filing. Just as J. Edgar Hoover introduced the use of fingerprinting and ballistics to catch crooks, so these advancements might deter tomorrow’s fraudulent filer.

And we’ll take a look at those new ideas in our next visit.

(Thanks to our friends Michael Kranish and the Boston Globe for their help with this blog. Michael’s article, IRS Overwhelmed by Identity Theft Fraud, is available on the Globe’s website.)

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