January 30, 2013

IRS's fraud prevention may slow tax refunds a bit

Cases have increased lately of thieves stealing Social Security numbers to file fraudulent returns.

Bloomberg News

WASHINGTON - Some taxpayers seeking a quick refund may have to wait longer than usual this year as the Internal Revenue Service tries to stop criminals who steal others' identities and file fraudulent returns.

The agency, which begins accepting 2012 returns Wednesday, is making its automated system more sensitive to signs of potential fraud, meaning some returns will get a closer look. Last year, the IRS prevented $20 billion in fraudulent refunds from being issued, up from $14 billion the previous year.

The IRS has been trying to shorten processing times to accelerate refunds, in part to encourage electronic filing and in part to reduce taxpayers' reliance on short-term loans. The speed of refunds presented an opportunity for fraud.

"It's a difficult responsibility for the IRS," said Benson Goldstein, a senior technical manager at the American Institute of Certified Public Accountants in Washington. He said some legitimate taxpayers may have their refunds delayed. "They're there to get the prompt refunds but at the same time to protect the U.S. Treasury."

The IRS expects to meet its goal of delivering 90 percent of refunds within 21 days, said Michelle Eldridge, a spokeswoman for the agency.

Taxpayer identity theft has become more prevalent in recent years. For fiscal 2012, the IRS's identity-theft unit received about 450,000 cases, up 78 percent over the previous year, according to the National Taxpayer Advocate, an independent organization within the agency.

Using Social Security numbers illegally obtained from sources such as doctors' offices and payroll departments, criminals generate fake wage reports and false tax returns. They tend to act early, before legitimate taxpayers file.


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