Research shows there is an influx of fraudulent tax returns filed by criminals using stolen identities. While recent consumer protection rules aim to prevent this, when it does occur, experts say that the Internal Revenue Service often protects the data on the fake tax return filing from the victim of identity theft.
In other words, the IRS won’t allow victims of identity theft to obtain the fraudulent tax return filed under their own name. In fact, IRS employees can be charged with a felony for providing private details found on tax returns, even if those tax returns were filed by identity thieves.
According to Bloomberg, 2.4 million stolen names or Social Security numbers were found on filed tax returns in 2013, citing data from the Treasury’s Inspector General for Tax Administration. That figure is nearly 10 times the figure seen in 2010. The IRS said that it suspects about $5.8 billion in tax returns were paid out for fraudulent filings.
But the IRS and tax filing companies like TurboTax say they are combatting tax fraud. The IRS said that it prevented more than $20 billion in fraudulent tax return payouts, and while one individual interviewed by Bloomberg said that TurboTax would not release the information on the fake tax return illegally filed in his name, TurboTax told reporters that it is its policy to release tax return documents when individuals can prove their identity.
The individual, Tim Loo, told Bloomberg that he endured months-long struggle to obtain the fake return. He argued that an IRS legal department memo from 2012 showed that people are allowed to see a copy of the “bad return,” and cited the 2012 Fair Credit Reporting Act that allows victims of identity fraud to access documentation that is related to the identity theft. But according to Loo, the IRS, TurboTax, and Intuit all barred him from accessing the fraudulent return filed in his name.
According to reports, the IRS said that its denial to allow Loo access to the fake filing was in an effort to protect sensitive data of other potential victims of identity theft or of the actual thief himself. Current regulations threaten tax workers at the IRS with criminal penalties for disclosing personal information, reports said.