FTC Says Tax Fraud is On the Rise and Here's Why

Sunday, March 11, 2012

Kelly Colgan


The bad guys have a new favorite way to steal your identity.

Used to be crooks snagged a Social Security number to open a credit card and run up charges. Now they've found an easier way to make money, according to the 2012 Consumer Sentinel Data Book, the Federal Trade Commission's annual report on consumer complaints.

Identity thieves prefer to commit tax and wage-related fraud. As the most common type of identity theft, tax and wage-related fraud accounted for 24 percent of consumer complaints in 2011. That number has nearly doubled from 12.7 percent in 2009.

"Tax fraud is easy money for crooks," said Brett Montgomery, a team leader in the Identity Theft 911 Fraud Resolution Center.

"They find the easiest and quickest way to steal money, and tax time is the place to be."

One reason why: It's easy for suspects to submit a tax return online with IRS e-file. By the time victims file their own tax returns, the crooks already have received the victims' refund, Montgomery said.

Another explanation for the increase in consumer complaints about tax fraud is the IRS Identity Theft Protection Specialized Unit. The group, dedicated to protecting taxpayers' identities, likely reports tax fraud to the Consumer Sentinel database, which would bolster the numbers, said Raul Vargas, a fraud expert at Identity Theft 911.

Indeed, tax and wage-related fraud accounted for a third to more than half of consumer identity theft complaints in the five states with the most identity theft:

  •  Florida: 55 percent
  •  Georgia: 51 percent
  •  Arizona: 43 percent
  •  Texas: 39 percent
  •  California: 32 percent

The report also found that identity thieves targeted:

  • Southern and border states. The five states with the most consumer-reported identity theft complaints were: Florida, Georgia, California, Arizona, and Texas.
  • Metropolitan areas with a significant immigrant population. The areas hit hardest were Miami-Fort Lauderdale-Pompano Beach, Florida; Montgomery, Ala.; and Greeley, Colo.
  • The military, particularly the U.S. Army. The areas with the highest number of military consumer complaints were Adak, Alaska; Fort Hood, Texas; and Fort Bragg, N.C. Service members and their families were targeted for credit card fraud, tax and wage-related fraud, and phone or utilities fraud.

Cross-posted from Identity Theft 911

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carl jhay Yes. Tax fraud is on the rise and in fact, States cracking down on tax zapper programs keeps on increasing. More states are now passing or considering regulations to ban so-called tax zapper programs. The software programs, that a few say cost the states billions a year in tax revenue, create a second set of books when a thumb drive is placed to the cash register. The second set of numbers used for tax reasons, under-reports the salary of the business. Many states are starting to crack down on businesses that use so-called "tax zapper" programs to keep two sets of books by simply inserting a thumb drive into the cash register. States say the programs costs them billions in unreported taxes. A personal loan can help you pay your taxes.
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