At the height of this tax season, Maine received 1,600 fraudulent income tax returns from people claiming the identity of someone else.

That amounted to hundreds more fake returns in the first half of this year than in all of last year, on pace to double 2014’s number by year’s end.

“As we thought, there was more activity, more fraudulently filed refunds,” said Dennis Doiron, director of Maine Revenue Services’ income tax division.

Fraudulent tax returns are not new. For years, scam artists have tried to submit state and federal tax returns using fake names and Social Security numbers in an effort to get someone else’s tax refund.

But, in recent years, scammers started using stolen identities. The returns bear real names tied to real Social Security numbers, and in some cases, real employers or other accurate information. That makes them more difficult to detect.

It can also cause aggravation for the person whose identity was stolen and who wants to file a real tax return.

Doiron had said in April that Maine Revenue Services expected the number of such fraudulent income tax returns to double. The department was seeing an increase as returns flooded in to meet the April 15 tax-filing deadline.

The numbers gathered by the department between January and June proved expectations correct. The state received 1,600 fraudulent returns, more than double the 700 it had gotten during the same period the year before. The state received 1,180 fraudulent returns in all of 2014, which means the first half of 2015 has already outpaced all of last year..

The increase reflects a national trend. The Internal Revenue Service reported just over 440,000 identity-theft incidents in 2010, according to the Treasury Inspector General for Tax Administration. By 2013, that number had jumped to 2.9 million.

According to a recent report from the Taxpayer Advocate Service, an independent organization within the IRS, the IRS saw a dip in identity-theft cases in 2014, but those cases have spiked again. The IRS had nearly 672,000 open cases in May 2015, up 69 percent from the 398,000 cases open in May 2014.

However, it’s unclear how many of those are truly cases of identity theft. The Taxpayer Advocate Service said the IRS’s taxpayer-protection program has a false-positive rate of 34 percent, which means one in three suspicious returns is legitimate. 

The aggravation for taxpayers, though, is very real. The Taxpayer Advocate Service said it had received more calls from people seeking help with their tax-return identity-theft cases during February, March and April 2015 than it had during the same period in any of the past three years.

It’s taking the IRS an average of 179 days to resolve cases, according to the advocate’s office.

Doiron said Maine Revenue Services has so far caught most ID theft before refunds were paid and before the true taxpayer became aware of the problem. Of the $2.8 million sought by fraudulent state returns the first half of this year, Doiron estimated the state paid out around $5,000 or $6,000.

Those cases get forwarded to Maine Revenue Services’ collections department, which seeks to recover the money from the person who filed the fraudulent return. The true taxpayer, he said, is not held responsible.

Many federal taxpayers have said they didn’t discover a fake return had been filed in their name until they tried to submit their real return and the IRS rejected it.

However, since Maine caught most fake returns before they were accepted and paid, Doiron said, Maine Revenue Services was able to notify state taxpayers before they filed and accepted their returns as legitimate when they filed.

Because scammers use stolen IDs to file fake tax returns, Doiron suggested that Maine taxpayers call Maine Revenue Services’ income tax division if they believe their identity has been stolen, even if it’s outside tax season. The department can flag that taxpayer’s information and look out for fraudulent filings.

The department can be reached at 626-8475.

ltice@sunjournal.com

This story was edited at 1:23 p.m. July 24, 2015 to clarify the number of fraudulent returns Maine received last year. It was an editing mistake.

Copy the Story Link