Identify Theft Tops ‘Dirty Dozen’ List Of Tax Scams: IRS

DETROIT, MI — Three Detroit residents dressed in business suits made the rounds of homeless shelters and soup kitchens in some of America’s poorest inner cities, promising the dispossessed citizens Section 8 housing vouchers, free telephones, stimulus vouchers and other government assistance, according to a federal grand jury indictment. After receiving their Social Security numbers and other personally identifiable information, they filed phony tax returns in the amount of $1 million, the Internal Revenue Service said.

Tax scams like that top the “Dirty Dozen” list of crimes released this week by the IRS, which warned millions of Americans to be alert as they prepare to file their income tax returns. The 2017 income tax filing deadline is April 18 this year because the traditional filing deadline, April 15, falls on a Saturday, and Monday, April 17, is Emancipation Day in the District of Columbia, which affects filing deadlines across the country.

The IRS said tax-related identity theft is declining after a series of safeguards were implemented following a Security Summit with representatives of the software industry, tax preparation companies, payroll and tax financial processors, and state tax administrators. In 2016, the number of taxpayers reporting stolen identities on federal tax returns declined by more than 50 percent, with nearly 275,000 fewer victims compared to the year prior, the IRS said.

Still, the agency said, many of these con games peak during filing season as people prepare their tax returns or hire tax professionals. More safeguards have been added by the Security Summit partners for 2017, and as a result, criminals are devising more creative ways to steal personal information to impersonate taxpayers.

“The Security Summit partnership continues to develop and strengthen tools to stop fraudulent returns from getting into the tax system,” IRS Commissioner John Koskinen said in a statement. “We're calling on taxpayers to do everything they can to protect their private information because criminals continue looking for new and more sophisticated ways of beating the system. We also encourage tax professionals and others in the private and nonprofit sectors with access to large amounts of sensitive information to watch out for identity theft schemes.”

In Michigan, Brewer, Salim, Juma and other impersonators are already getting their comeuppance after investigations by multiple federal, state and local law enforcement officials.

The 15-count indictment returned by the federal grand jury charged Brewer, Salim and Juma with one count each of conspiracy to defraud the United States; Brewer, who also has a residence in Redford, and Salim were each charged with four counts each of theft of government property; and Brewer was also charged with five counts of filing false claims for payments and five counts of aggravated identity theft.

The indictment accuses them of targeting high-poverty inner city areas in Michigan, Maryland,
Ohio, Pennsylvania,Illinois, Kentucky and other states.

Others recent cases include:

U.S. v. Katrina Duling, Timothy Wilcox and Paul Adams: A 21-count federal indictment charged Wilcox, Duling and Adams, all of Hillsdale County, in the operation of an identity theft ring. Duling and Wilcox, working with Adams, obtained information on more than 100 people to file fraudulent tax returns and apply for federal and state student financial aid from January 2009 through December 2014, the government said.

During the period, the defendants filed in excess of $1 million in fraudulent student loan applications, according to the indictment. Also, from January 2012 and December 2014, they filed more than $400,000 in fraudulent income tax returns, the indictment said.

The indictment charges the three with one count each of conspiracy to defraud the government with respect to claims; five counts each of false, fictitious or fraudulent claims; three counts each of mail fraud; four counts each of theft of public money; and seven counts each of aggravated identity theft. Additionally, Adams was charged with one count of felony firearm.

U.S. v. Derrick J. Gibson: Gibson organized and led a group of 34 people in a scheme to defraud the Internal Revenue Service through the filing of false federal income tax returns claiming more than $22 million in false and fraudulent federal income tax returns, the IRS said.

According to the indictment, Gibson and others used other individuals personal identification information, obtained in part from patients and employees of the Battle Creek Veterans Affairs Medical Center and inmates of the Michigan Department of Corrections, to file false tax returns.

To date, 33 of the 34 defendants charged with conspiring to defraud the Internal Revenue Service have pleaded guilty to the charges. One defendant was dismissed from the indictment because a co-defendant admitted she and Gibson filed the false federal income tax returns in his name, the IRS said. On Jan. 6, 2017, Gibson was sentenced to 120 months in prison and ordered to pay restitution of $16,000,000 to the IRS.

Security Reminders For Taxpayers

To protect against identity theft and tax scams, taxpayers and tax professionals should:

• Always use security software with firewall and anti-virus protections. Make sure the security software is always turned on and can automatically update. Encrypt sensitive files such as tax records stored on the computer. Use strong passwords.
• Learn to recognize and avoid phishing emails, threatening phone calls and texts from thieves posing as legitimate organizations such as a bank, credit card company and government organizations, including the IRS. Do not click on links or download attachments from unknown or suspicious emails.
• Protect personal data. Don’t routinely carry a Social Security card, and make sure tax records are secure. Treat personal information like cash; don’t leave it lying around.

“Everyone should guard their personal information by protecting their computers and using extreme caution when viewing emails or getting surprise phone calls,” Koskinen said. “We also encourage people to share this information with their friends and family. We all know someone who is challenged by technology, and some easy, common- sense steps could help protect these people from identity theft.”

The Security Summit launched a “Taxes. Security. Together.” public awareness campaign aimed at taxpayers that provides easy tips to taxpayers to better protect themselves, including video, tax tips and fact sheets to help taxpayers stay safe online. The Summit also initiated a “Protect Your Clients; Protect Yourself” campaign aimed at tax professionals who are increasingly being targeted by cybercriminals. This also includes a series of easy tips and alerts as schemes arise.

Tax-related identity theft occurs when someone uses a stolen Social Security number or Individual Taxpayer Identification Number (ITIN) to file a tax return claiming a fraudulent refund.

The IRS said undoing the damage caused by identity theft is a frustrating and complex process for victims. While identity thieves steal information from sources outside the tax system, the IRS is often the first to inform a victim that identity theft has occurred, the agency said.

The IRS is working hard to resolve identity theft cases as quickly as possible.

For more information, see the special identity theft section on IRS.gov.

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