Many U.S. citizens are bound to experience delays in getting their tax returns processed this year, thanks largely to more stringent controls enacted by Uncle Sam and the states to block fraudulent tax refund requests filed by identity thieves. A steady drip of corporate data breaches involving phished employee W-2 information is adding to the backlog, as is an apparent mass adoption by ID thieves of professional tax services for processing large numbers of phony refund requests.
With little more than a month to go before the start of the 2016 tax filing season, the IRS and the states are hunkering down for an expected slugfest with identity thieves who make a living requesting fraudulent tax refunds on behalf of victims. Here’s what you need to know going into January to protect you and your family.
With the 2014 tax filing season squarely in the rearview mirror, state tax authorities are struggling to incorporate new approaches to identifying and stopping fraudulent tax refund requests, a $6 billion-a-year problem that’s hit many states particularly hard this year. But some states say they are encountering resistance to those efforts on nearly every front, from Uncle Sam to online tax vendors and from the myriad of financial firms that profit handsomely from processing phony tax refunds.
When identity thieves filed a phony $7,7700 tax refund request in the name of Joe Garrett, Alabama’s deputy tax commissioner, they didn’t get all of the money they requested. A portion of the cash went to more than a half dozen U.S. companies that each grab a slice of the fraudulent refund, including banks, payment processing firms, tax preparation companies and e-commerce giants.