The Homa Files

This one strikes close to home.

Article in this morning’s WSJ E-Filing and the Explosion in Tax-Return Fraud

Over 80% of individual returns were e-filed last year.

As a direct result:

• Tax fraud is now the third-largest theft of federal funds after Medicare/Medicaid and unemployment-insurance fraud.
• Tax-identity theft exploded to more than 1.1 million cases from 51,700 in 2008.
• Last summer, the Treasury “discovered” an additional 1.5 million potentially fraudulent 2011 tax refunds totaling in excess of $5.2 billion.
• The IRS has a backlog of 650,000 identity theft cases, and it usually takes over a year to resolve each of them

Here’s why I don’t just shrug off those stats.

Last year, after e-filing, my identity was compromised … some jabrone tried to open credit accounts in my using my info.

Fortunately, the card companies flagged the apps as suspicious and contacted me … so no harm done except for the couple of days of worried phone calls.

I can’t prove that the ID theft was related to efiling, but the timing sure suggests that it was.

For peace of mind, I subscribed to an Identity monitoring service … just in case it happens again.

This weekend, I got a pop-up message, allegedly from Microsoft Security Essentials … MS’s anti-virus program.

It had discovered some suspicious files on my computer and asked that I forward them for review so that Microsoft could refine its AV program.

Guess what?

The files were my TurboTax files from last year.

Hmmm.

No way.

Instead, disabled MS Security Essentials and scrubbed my pc with Norton AV.

May have been a coincidence, but not worth taking chances.

Read the WSJ article for some details re: how the ID thieves do it.

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Why does the IRS encourage e-filing?

Two main reasons …

First, it cuts their labor costs.

They don’t need as many agents screening and scanning returns.

So, agents can be redeployed to doing audits

That supports the 2nd reason: Targeting taxpayers for audit is a major factor behind the IRS’s push for e-filing.

Electronic returns are  “a rich and fertile field” for selecting audits … since details can be matched electronically against, say, bank submissions.

And, e-filed returns are available for audit several months sooner than paper returns, allowing more time before the three-year statute of limitations expires.

* * * * *
Bottom line: Caveat e-filer … obvious benefits … but also some substantial downsides.

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This entry was posted on January 14, 2013 at 12:14 pm and is filed under Identity Fraud, IRS, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.