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Tax Refund Fraud

March 21, 2012 by staff 

Tax Refund Fraud, Criminals across the country are raking in billions of dollars in tax refunds through a new and brazen form of fraud that takes advantage of the IRS’s fast online returns, law enforcement officials say.

Using laptops and free Wi-Fi connections, criminals are stealing identities and using the names of legitimate taxpayers to file fraudulent online tax returns. They’ve raked in billions, buying luxury cars, expensive jewelry and plastic surgery, police said.

“It’s like the federal government is putting crack cocaine in candy machines,” said Detective Craig Catlin of the North Miami Beach, Florida, Police Department. “It’s that easy.”

First, thieves obtain Social Security numbers and other personal information from insiders at hospitals, doctor’s offices, car dealerships or anywhere the information is stored. Then, they file an online tax return using the real taxpayer’s name and a fictitious income. In most cases, the criminals buy a debit card so the IRS can issue the refund on that card, although some thieves have also gotten their returns on actual Treasury checks.

The thieves know that the IRS does not verify the employer W-2s sent with the return until after the refund is issued.

It is a particular problem in the state of Florida, according to law enforcement officials.

“We can’t go … two days in a row without making a traffic stop, and there’s going to be tax return fraud in the car,” Catlin said. “We could stop an 18-year-old kid who’s got five (debit) cards. The average is $5,000 per card. So they’ll have $25,000, which is really cash, even though it’s on debit cards.”

And it’s not just small-time criminals, he said.

“We have other cases that range up to $100 million where subjects have opened up corporations and bank accounts and business accounts,” Catlin said. “And they’re receiving millions of dollars from the IRS that are all fraudulent.”

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