A New Era of Clandestine Tax Scams - OZY | A Modern Media Company

A New Era of Clandestine Tax Scams

A New Era of Clandestine Tax Scams

By Farah Halime


Because why wouldn’t you want to keep your hard-earned cash safe?

By Farah Halime

When Michelle Quinn filed her tax return last year, she didn’t get the check — someone in Nigeria did. It wasn’t until the 34-year-old mother of three wrote numerous complaints, filed a police report and spent weeks dealing with the Internal Revenue Service that she got ahold of her $8,000 rebate, she says. This year was going to be different, which was why she filed her taxes early — in January. But soon after, Quinn says, she got a letter saying her returns had been rejected. It turns out the tax scammers had beat her to it, in an attempt to claim another fraudulent refund. “It’s amazing that this is going on, and it’s happening so easily,” Quinn says.

This year’s tax-filing deadline is just around the corner, but tax fraudsters have been busy of late coming up with more clandestine methods of making money than in the past. Some have been working California neighborhoods by breaking into mailboxes, stealing tax refunds and then cashing them through a complicated web of accomplices who are in on the scheme. In New York, thieves have directed hundreds of fake tax rebates to a single home, hoping to make a fortune. These kinds of problems have become so severe that the IRS rejected or suspended 4.8 million suspicious returns last year, thwarting $11.8 billion in confirmed fraudulent refunds, according to IRS data. “This is a pandemic we’re facing, and [scammers] are coming in through all sorts of ways,” says Adam Levin, the former director of the New Jersey Division of Consumer Affairs and founder of IDT911, an identity-protection and risk-services firm that calls for increased protections online to prevent tax frauds.

The U.S. Postal Service, which partnered with the IRS after a spate of crimes, discovered one address in the Bronx last year that had received more than 100 tax rebates — all of them fake. 

Indeed, tax-related identity theft — increasingly occurring online — is one of the newest crimes du jour, and Levin knows of cases where children as young as 2 have had their Social Security numbers stolen and obituaries milked for key personal details. Last year saw a nearly 50 percent jump in ID-theft complaints compared to 2014, the U.S. Federal Trade Commission warns, and it’s by far the biggest contributor to a spike in tax-refund fraud. “Refund fraud caused by identity theft [is] one of the biggest challenges facing the IRS,” the agency’s commissioner, John Koskinen, acknowledged publicly last year. And the IRS tells OZY that “fighting identify theft remains a top priority.”

Now come a variety of attempts to stamp out these new waves of tax scams. The U.S. Postal Service, which partnered with the IRS after a spate of crimes, discovered one address in the Bronx last year that had received more than 100 tax rebates — all of them fake. “We did surveillances, but we never actually caught that person,” says Thomas Boyle, the assistant inspector-in-charge at the Postal Service who oversees New York’s division of criminal investigators and postal police. Even so, postal carriers in the area have recently been told to watch for red flags. “We educate our carriers to notify us as soon as they see a lot of IRS letters going to the same address,” says Boyle — and some perps have ended up in jail for their crimes.

The IRS has also joined forces with the Federal Bureau of Investigation and police forces in recent years, giving the agency fresh access to technology, surveillance and otherwise hard-to-get personal data. “There is a lot more information sharing,” says Aaron Gogley, a special agent working with the FBI who was brought in from the IRS as part of the new task force. In one Texas-based case that Gogley says he worked on last year, a 23-year-old was arrested as part of a stolen-identity refund fraud scheme that used surveillance technology only the Houston police department could access. The sum he had allegedly stolen was not revealed, but if convicted, the man could face decades in prison. Oftentimes, Gogley says, there’s overlap where the IRS knows the perp but can only find and arrest them with help from the police or FBI.

But even when the bad guys get caught these days, that’s no guarantee the info-sharing, tech-centric means of nabbing them will translate to a swift resolution. Case in point: The IRS prevented $24.2 billion in fraudulent refunds requested in 2013 but paid out only $5.8 billion, according to a Government Accountability Office report released last year. Tate Renwick knows all too well about the frustrations. The 38-year-old vice president of sales at a tech company lost out on $12,000 in an unclaimed tax return last year when his Social Security number was stolen. After a drawn-out back and forth with the IRS, Renwick says he still needs to wait months before he’ll see his money. He notes the IRS, which wouldn’t comment on this particular case, communicated with him only via snail mail, making the process that much more antiquated. “It’s like having a pen pal far away who is holding your money,” he says.

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