IRS sees staggering jump in identity theft cases

May 27, 2011

Identity theft fraud caught by the IRS has skyrocketed since 2008, the Government Accountability Office said in a report released this week.

n 2010, the GAO said the IRS found 245,000 cases of identity fraud — cases in which Social Security numbers of others were used to either falsely try to collect a refund or to get work and avoid taxes. That is up from fewer than 52,000 cases in 2008.

A particularly scary part of the crime is that the victims have no way to protect themselves.

“The incidence of tax-related identity fraud is indeed staggering,” said Paul Stephens, director of policy and advocacy for Privacy Rights Clearinghouse. “The number of reported cases significantly undercounts the actual numbers because there tends to be a significant delay in detecting most cases of tax-related identity fraud.”

He said the government is somewhat hamstrung from doing more to protect the victims.

“Unfortunately, various laws constrain the IRS from taking more aggressive action to curtail this abuse,” Stephens said. “For consumers, tax-related identity theft can be extremely difficult to resolve, despite the fact that IRS has set up a special unit to assist taxpayers with this problem. Other than trying to protect their Social Security numbers from unnecessary disclosure, there is little that consumers can do to protect themselves from this type of identity theft. ”

According to the GAO, privacy laws sharply limit information that is shared with victims and even with criminal investigators.

“IRS cannot disclose to the taxpayer any other information pertaining to employment or refund fraud, such as the perpetrator’s identity or any information about the perpetrator’s employer,” the GAO reported. “Additionally, IRS has limited authorities to share identity theft information with other federal agencies.”

Even in criminal investigations, the IRS can share very limited information with federal investigators and less with state and local authorities, the GAO said.

The growth in the number of cases appears due in large part to the IRS building screens in its computer systems to do such things as flag filings using the Social Security numbers of the dead (a recent pilot project). The GAO said in many instances it is the legitimate taxpayer’s filing that triggers the alert to the IRS because it appears as though a duplicate return has been entered into the system. Because of the confusion, the processing of the return of the legitimate taxpayer gets delayed.

Similarly, when a fraud uses someone else’s Social Security number to get a job, it appears as though the victim has unreported income. That actually triggers a notice sent to the victim telling them they failed to report all their income.

The GAO also reported that the IRS has made some progress in trying to get a handle on this kind of fraud. One step has been to help those who are already known victims of identity theft. Those taxpayers are channeled to a special unit set up for victims who might otherwise get trapped in the bureaucracy.

Some known victims — about 56,000 — were also assigned special personal identification numbers to further protect their returns.

At a minimum, people need to not make it easier for thieves to get the Social Security Numbers. Here is a list from the Federal Trade Commission of the main ways Social Security Numbers are stolen:

  • From workplaces
  • By pay an employee who has access to these records
  • Hacking into the records
  • Stealing mail with personal financial information
  • “Dumpster diving”
  • By posing as a landlord, employer or someone else who may have a legal right to access your report
  • Stealing your wallet or purse
  • Completing a change of address form to divert your mail
  • Posing as a legitimate company and coaxing you to reveal the information by phone, a web form or by email





Best, Paul




Paul Stephens


Director of Policy and Advocacy


Privacy Rights Clearinghouse


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At Identity Theft 911, we agree with the article and have been seeing the same trend in the last 2 to 3 years. We based our tax fraud assistance off of the GAO report from 2008 and this report seems to be a follow-up to that. One positive to mention is that the IRS has reduced the turn-around time of ID Theft related tax fraud cases greatly. A few years ago, it wasn’t uncommon for a case to take over a year to be resolved. Today, most victims are looking at 3 to 6 months. The single biggest contributor to the increase in fraud is the ease in which a fraudulent return can be filed online. The details in the GAO reports show that the number of fraudulent e-file sites has grown from a few hundred per season just 4 years ago, to thousands of new bogus sites each year. Another positive to mention is that the IRS has developed a “marker” for victims. This has greatly reduced the number of victims who have perennial problems filing.

A good tax resource, including tips to protect yourself when filing, can be found on our blog: afe-during-tax-time/

Matt Cullina, CEO, Identity Theft 911

Posted by IDT911 | Report as abusive

[…] Click here for Article. They will do anything to get your Social Security number. […]

Posted by Identity Theft Jumps- Protect Your Social Security Number « Social Security Disability Blog | Report as abusive

Possible error in article: If someone gets a job with your social security number, their social security contributions from their paycheck are deposited in YOUR social security account. This increases your lifetime contribution which is ironically good for you but bad for them.

I’m puzzled why the IRS would go after you for the taxes, because the employer of the individual fraudulently using your social security number will pay the IRS that individuals payroll taxes (Federal and State) under your social security number.

Problem that could occur: The individual fills out a W4 form using your social security number and their name, with 30 or more deductions! As a result, the employer deducts very little if any payroll taxes. The IRS gets your social security number, their name, with hardly any payroll taxes paid, and assumes you are trying to evade taxes! If that happens you better have a few thousand to retain a tax attorney.

Posted by DisgustedReader | Report as abusive

Guess who is the worst culprit for dumpster diving in putting WHOLE SSN on paper……. the IRS.

Posted by SVargas | Report as abusive

[…] Most victims have no idea their Social Security numbers have been used fraudulently, according to this article on Reuters. The increase is likely due to better security mechanisms built into the IRS’s computers systems, […]

Posted by A Post-Mortem on Tax Fraud: Identity Fraud Cases Quadruple in Two Years | Report as abusive

[…] is interesting is how a person’s social security number is stolen, full list is here at blog reuters. The list includes dishonest employees with access to personal records, hacking, […]

Posted by Virtual Shadows | Report as abusive