IRS Tax Scam Becoming More Prevalent

This is an archived article and the information in the article may be outdated. Please look at the time stamp on the story to see when it was last updated.

DES MOINES, Iowa -- A lot of late tax filers are finding out the hard way, they may have been the victim of tax related identity theft.

Among them, Joe Anderson of Des Moines. "You know, like I do most years I waited for the last minute to file my taxes so I went ahead and got it done," Anderson said. "I got it done in record time one day before it was due and sent it in electronically and I got back this notice that someone had already filed my taxes."

It's an old scam, but tax related identity theft is becoming more and more common according to the IRS. Anderson is one of more than 6.5 million people who had their Social Security numbers stolen last year. All a thief needs is that number and your name, and they can file a false tax return in your name. The IRS will then send a paper check to whatever address is listed, even if it doesn't match the one you have on file.

The IRS could also direct-deposit the money to whatever bank account number that is provided. That includes prepaid debit cards, so it's virtually untraceable.

Tax expert Michael McClimon of Educators Financial Group in Des Moines says he's seeing more and more cases of tax related identity theft every year.

"It's growing more and more every single year," McClimon said. "And nobody knows how they got them. But it's certainly a problem that's becoming more and more prevalent."

McClimon says, while anyone can be a victim, scammers tend to target those with lower incomes.  It's easier pickings.

"Their Social Security numbers are typically out there a lot more because they might be signed up for programs, government programs, so the Social Security is getting out to a lot of different people."

IRS Spokesman Bill Brunson says the agency "has been very aggressive in putting filters in" to try to detect these scams. That's how the agency was able to halt $63 billion worth of fraudulent refunds between 2011 and 2014.

Despite the filters, the IRS still pays out billions of dollars to identity thieves.

"I don't know how to correct the problem but it's certainly getting worse," McClimon said.

If you are a victim of tax related identity theft, expect it to take 120-180 days for the IRS to investigate. During that time, you will not get a refund and you will have to jump through a lot of hoops. One way to reduce your chances of being a victim of tax related identity theft is to file your returns as soon as possible.

There are more tips on the IRS website.