Tax season brings scams, state nabs $1 million in fraudulent claims in 2014

INDIANAPOLIS (WISH) — In the three weeks since tax season officially began, Indiana’s Department of Revenue claims it has flagged more than 500 suspicious attempts to collect tax refunds totaling more than $1 million.

Investigators expect to find more.

Calling it “not just a national problem but an Indiana problem,” the Department of Revenue and the Indiana Attorney General’s office have formed a partnership this year to crack down on tax scams and identity theft. The Department of Revenue has hired additional investigators, but both agencies are pushing citizens to visit the state’s websites to learn how to avoid becoming a victim.

The problem is tracking down suspects who often use computers out of state to hack into citizens’ personal information, an I-Team 8 investigation uncovered. Of the 1,500 fraudulent cases the state’s Department of Revenue identified last year, not one was recommended for local prosecution. The same is true for the 54 complaints received by the Indiana Attorney General’s office.

“Many of them we simply can’t make the case. These are very difficult cases to make. And in many cases these are perpetrators who aren’t even in Indiana,” said Bob Dittmer, a spokesman for the Department of Revenue.

Erin Reece, a spokeswoman for Indiana Attorney General Greg Zoeller’s office, said victims who do file a complaint with the Attorney General’s Office will receive educational materials, guidance on filling out the necessary IRS affidavit form and given the appropriate contact information. Reece added that the Indiana Attorney General’s office doesn’t have the tools at its disposal to investigate federal tax complaints, which is why the IRS often takes the lead.

A spokeswoman with the IRS Criminal Unit said she was unable to provide I-Team 8 with specific numbers on how many Indiana cases were eventually prosecuted.

Unusual victim

Mark Barmes has a stack of papers thicker than a Webster dictionary that he usually keeps with him. They are the documents he’s accrued since he learned he may have been the victim of identity theft.

After filing his 2012 taxes last year, Barmes claims he didn’t receive a tax refund. While he admits he knew he owed thousands in back taxes, it was a phone conversation with an IRS agent that Barmes claims made him think his identity was compromised. Barmes claims he was informed by the agent that someone filed taxes using his name and received a tax refund in 2006.

“In 2006, they worked in my name which was physically impossible for me to do,” he said.

Impossible because in 2006, Barmes was in state prison – serving out a sentence for forging company checks he used to support his former crack-cocaine habit. (The state’s Department of Corrections confirmed Barmes was in prison during that time, in 2006 at a facility in Plainfield, Ind. and later at Correctional Industrial Facility in Pendleton, Ind. Barmes made parole and was released in late 2011.)

“(The IRS) said they are conducting a thorough review of my return. I called them up and said that I don’t understand the thorough review,” Barmes said.

When asked if the irony escaped him – that a convicted forger would become the victim of identity theft – Barmes said no.

“I thought it was karma,” he said.

Unable to discern which tax debts he owed and which may have come from scammers, Barmes filed for bankruptcy, which was finalized last week, federal court records I-Team 8 obtained show.

I-Team 8 reached out to the IRS Criminal Investigations Unit in Chicago, asking to verify if Barmes had become a victim. In an email, the spokeswoman wrote “it would be very difficult for me to determine if he was the victim of a scheme.”

Barmes filed a police report with IMPD last spring, but claims he too has had trouble determining who was the alleged perpetrator. An IMPD spokesman told I-Team 8 no suspect was identified.

How to avoid being scammed

The Internal Revenue Service has identified dozens of ways scammers target taxpayers. A link to its website can be found here.

“The scammer typically will obtain people’s social security numbers and then will file pretending to be that person and get the refund quickly,” said Abby Kuzma, the Director of Consumer Protection with the Indiana Attorney General’s office. “It’s better not to wait, it’s better to file right away.”

Among the tips from Kuzma recommends:

  • Don’t use an unsecured WiFi connection to prepare your taxes online or do online banking.
  • Use a trusted tax expert.
  • Don’t give out your information over the phone or through an unsecured website.

More information can be found at the Department of Revenue’s website, by clicking here.

Dittmer says his office has hired eight new tax investigators whose only job is to uncover fraudulent tax claims.

“And we are working on getting better at doing that, and we are certainly focused on doing that this year,” he said.

This year, DOR has added steps to ensure claims are vetted. Any claim that comes asking for a refund is immediately vetted through LexisNexis, a third party database company.

If it clears, the tax refund is processed within 12 to 14 days. If it’s not, the state sends a letter to the potential victim asking them to answer a security questionnaire on a secured website. Dittmer admits the vetting process is necessary, but could result in tax returns being delayed by one to five days.

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