How Much Tax Identity Theft? IRS Doesn't Know

NEW YORK (Credit.com) — Tax return fraud by identity thieves has become increasingly troublesome in the past few years, but a report suggests the Internal Revenue Service doesn’t know how widespread the issue is.

The IRS said recently that it has no way of knowing the total number of fraudulent tax returns filed every year, or how much these documents cost taxpayers, according to the U.S. Government Accountability Office. Officials at the agency says all it can do is keep track of the number of cases it successfully identifies as being fraudulent, either on its own or through reports from consumers – but agency officials cannot guess how many cases aren’t caught.

Further, the tax agency has no idea whether a fraudulent return it has caught was filed by a single criminal or is part of a larger scheme to defraud consumers, the report said. Crime rings have been known to file tens or even hundreds of these documents over the course of a few years or more, and are caught only if IRS analysts can detect patterns across several such returns that are reported as being fraudulent. Along similar lines, the IRS doesn’t know who is behind a bogus filing unless it takes criminal action against those responsible in some way.

The IRS recently began creating what is known as the Refund Fraud and Identity Theft Global Report to help it better understand and track incidents of this type of crime, the report said. The GAO also recommended that the agency take more information into account in the future to ensure better reporting.

In the meantime, it is wise for consumers to check their credit reports regularly to ensure no one has opened an account in their name, they said.

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