When Steve Martin tried to wrap up mortgage paperwork last week to buy a Spokane home, he thought he could simply verify through the IRS that he hadn’t paid taxes for years because his disability income didn’t meet the threshold necessary to file a return.
Instead, his call to the IRS revealed a shocker: An identity thief had filed a 2011 tax return under his name and Social Security number. He was told the imposter in Texas received a refund.
Martin, 59, said the news came after the IRS employee initially told him that he owed nearly $5,000 in penalties and interest, because after the 2011 refund was issued, the federal agency received notice of unreported disability income.
“She indicated to me that they were getting ready to levy my bank accounts … and they were going to check for any assets they could seize,” said Martin, who moved to Spokane in May from California. A credit report for his mortgage application had shown no financial red flags.
“I couldn’t believe what I was hearing,” he said. “They had corresponded in letters to someone in Texas, so I had no clue this was going on.”
The incident surprised him, he said. “Prior to that, I didn’t have a clue that the IRS had any capacity to be penetrated like this.”
The downtown Spokane IRS office cleared the mortgage issue by stamping an affidavit of identity theft for Martin. He since has learned he’s among an increasing number of victims affected when stolen personal information is used to file for fraudulent tax refunds.
Along with credit card fraud, taxpayer identity theft is on the rise, and the IRS has stepped up efforts to catch and investigate such cases. The Treasury inspector general reported that identity theft affected 1.2 million taxpayers in 2012 and 1.6 million just in the first half of 2013.
This spring, the IRS said it had more than 1,800 identity theft investigations underway and more than 3,000 people working on identity theft issues.
“Identity theft is one of the fastest-growing crimes nationwide, and refund fraud caused by identity theft is one of the biggest challenges facing the IRS,” Commissioner John Koskinen said in a statement.
David Tucker, a Seattle IRS spokesman, said taxpayer scams happen even in the summer.
“There are a number of folks who request an extension, which means their new deadline is Oct. 15,” he said. “Just because it’s summertime doesn’t mean there aren’t identity thieves out there trying to get taxpayers’ money.”
Scammers also are prowling with phone calls and emails, including intimidating calls from people pretending to be IRS agents and giving fake badge numbers, Tucker said. If people suspect taxpayer fraudulent activity, Tucker said they should call the IRS at (800) 829-1040. In Spokane, they should visit the IRS office at 920 W. Riverside Ave.
“The IRS will always send taxpayers a written notification of any tax due and that’s via the U.S. Postal Service,” Tucker said. “The IRS never asks for debit, credit or prepaid card information over the phone.”
Martin isn’t sure exactly how the identity thief got his personal information. Around 2011, he got a bank notice of suspicious fraudulent activity that quickly cleared. Separately, he got a letter from a hospital where he had some minor treatment saying the organization’s database had been compromised.
“I don’t know for sure if it was at the hospital, or at the bank, or PayPal,” he said, but he believes the thief got his information from a compromised database.
Martin said he’s hired a tax professional to complete paperwork further clearing up the 2011 filing.
He acknowledges it’s harder for people who don’t file returns to stay on top of the issue.
Tucker, at the IRS, encouraged those people to call the IRS if they suspect fraudulent activity or think they could be susceptible.