Saturday, January 28, 2012

Tax return scheme delays early filers' IRS refunds.

From the Detroit Free Press -

Bad news is hitting consumers who filed 1040 federal income tax returns early. They're going to wait possibly a week or so longer than expected to get refunds as the Internal Revenue Service attempts a tougher crackdown on criminals who file fake returns to snag illegal refunds early in the season.
We got news of one such case involving a group out of Detroit this week.
John Hewitt, CEO and founder of Liberty Tax Service, based in Virginia Beach, Va., said taxpayers who filed returns any time from the first day of the tax season, Jan. 17, through Jan. 24 are facing potential delays.
"Usually, the refunds take a week to 10 days," said Hewitt, adding that refunds are likely to take up to 14 days.
Taxpayers didn't expect these delays and are upset. Many intentionally file early in the season because they need that tax refund to pay bills. Families could experience more hardship than others even with only an extra few days of delay, he said.
Though IRS officials would not say it directly, the crackdown delaying some refunds could involve a case from Detroit, where a suspected criminal ring was disrupted by federal officials.
Federal officials say that a group of metro Detroit tax preparers submitted at least 352 fake tax returns using names and Social Security numbers of the dead in an attempt to obtain more than $800,000 in refunds, according to court documents.
Two area tax preparers were arrested Friday for conspiracy to defraud the government by filing false tax returns and obtaining refunds, using the names and information of recently deceased individuals, according to U.S. Attorney Barbara L. McQuade.
According to court documents, the tax returns filed in the scheme reported false household employee income and used various credits, including the Earned Income Tax Credit and education credits, to create fake returns to generate refunds.

ID thieves file early

The IRS said, generally, that the delays are related to growing concerns about cyber-fraud and crooks who obtain refunds by stealing Social Security numbers, creating fake returns, filing 1040s electronically early in the season and obtaining tax refunds.
The best advice taxpayers are getting when it comes to preventing tax-time cybercrime is to file tax returns early. But the crooks know this, too, so maybe they're filing even earlier, too?
"It's definitely in favor of the identity thief right now," said Tami Nealy, a spokeswoman for LifeLock in Tempe, Ariz.
She noted that the IRS system has a first-come, first-served process that can give ID thieves an advantage during tax season. Say someone stole your Social Security number and name, and then filed a fake return for a refund using your ID.
If you file your real return a month or so later, again using your ID, your return is rejected if the thief filed first and was successful. And then, the headaches start.
Nina E. Olson, the national taxpayer advocate, stated in the advocates' annual report to Congress that the "IRS's approach to identity theft is still not working as intended."
The report noted that the centralized Identity Protection Specialized Unit -- the IRS department that deals specifically with ID theft -- received more than 226,000 cases in the 2011 fiscal year -- a 20% increase from fiscal year 2010.
And the Taxpayer Advocate Service experienced a 97% increase in stolen identity cases in 2011 -- on top of a 23% increase in 2010.
H&R Block told clients that the IRS is using a new technology this year that has caused the agency to take more time to validate returns at the beginning of the season.
If you're looking at a delay, tax preparers want you to know that it's not them -- it's the IRS.
Hewitt said he understands that the refunds are expected to be back to a more normal pattern for taxpayers who file returns now or later.
At the opening of the 2012 filing season, the IRS advised taxpayers who electronically file and select direct deposit that they could see their refunds in as few as 10 days and 90% of refunds are provided within 21 days.
Some taxpayers are getting refunds much faster, the IRS said, but at this time, taxpayers should expect refunds to be issued as indicated in the original IRS guidelines.
Taxpayers can go to to see "Where's My Refund?"
The IRS said it apologizes for any inconvenience caused by the revised refund dates.