Saturday, May 3, 2014

Sources of Income Tax Identity Theft

Compiled by: Larry Walker II ::

In a February 2014 House Oversight Hearing, J. Russell George, Treasury Inspector General for Tax Administration, stated that, "IRS employees are entrusted with the sensitive personal and financial information of taxpayers. Using this information to perpetrate a criminal scheme for personal gain negatively impacts our Nation’s voluntary tax system and it can generate widespread distrust of the IRS. TIGTA aggressively investigates IRS employees involved in identity theft-related tax refund fraud and refers these investigations to the Department of Justice for prosecution. Many of these employees face significant prison sentences as well as the loss of their jobs if convicted."

I can think of several other situations negatively impacting our Nation’s voluntary tax system and generating widespread distrust of the IRS. Former IRS Official Lois Lerner's use of executive privilege in targeting Barack Obama's political opponents comes to mind, but I digress. What's on my mind today are sources of identity theft.

I personally know several people who have been victims of income tax related identity theft. At least two have had to wait more than a year to receive legitimate refunds from the IRS. In one case over $8,000 was delayed over a two-year period. When it comes to the process of having income tax withheld at the source, perhaps it's better to underpay. Whenever I hear about a case of tax related identity theft, the question I always ask myself is how the thieves were able to obtain the victim's personal information. The answers I found are shocking.

The major sources of income tax identity theft appear to be healthcare providers, including doctor's offices, nursing homes and even veterans hospitals, but even more disturbing, from within the IRS itself.

IRS Employee Orchestrated Identity Theft Refund Scheme Using Taxpayer Records (January 13, 2014)

On December 10, 2013, in the Northern District of Georgia, IRS Tax Examining Technician Missy Sledge was indicted for aggravated identity theft and mail fraud.

According to court documents, as part of her official IRS duties, Sledge had access to taxpayers’ personal identifiers, including names, Social Security Numbers (SSN), dates of birth, and addresses, and information about tax professionals. Sledge used this access in furtherance of an identity theft scheme which included the filing of fraudulent tax returns and the subsequent theft of refunds. With information from IRS computer systems, Sledge provided taxpayers’ personal information to her coconspirators.

It was part of the scheme that others would file fraudulent tax returns with the IRS using the stolen identities of various taxpayers. Sledge used her IRS computer to review the fraudulent returns submitted to determine if she could release fraudulent tax refunds from those returns. When identified, Sledge would release the fraudulent refund for payment. Sledge further assisted those involved in the scheme in impersonating either the taxpayers or their authorized representatives so the taxpayers’ addresses of record could be changed to a fictitious address accessible to Sledge or others involved in the scheme. Sledge then caused the IRS to mail refunds in the taxpayers’ names to the fictitious address to be intercepted or stolen.

On May 21, 2013, an individual was arrested in Texas and was found to be in possession of an IRS refund check in the amount of $595,901.97, along with three pages of internal IRS documents containing tax information for one of the identity theft victims. A review of IRS systems revealed Sledge made accesses to this taxpayer’s account, as well as to the taxpayer’s accountant’s information, on seven dates between February 2013 and May 2013. The victim was due a large refund because she had overpaid her estimated taxes. One of the perpetrators used the accountant’s information and Government-issued representative number to impersonate the tax practitioner in telephone communication with the IRS on March 5, 2013, to change the address on record from a North Carolina address to an address in Atlanta, Georgia. Sledge then released the $595,901.97 refund to the fictitious address.

On May 23, 2013, an e-mail was sent from Sledge’s IRS e-mail account containing the personal information for two other taxpayers, a married couple. The e-mail included the taxpayers’ names, SSNs, dates of birth, address, and tax preparer’s information. A subsequent telephonic address change was made, changing the address of record from the taxpayers’ Massachusetts address to a Georgia address, and a refund in the amount of $961,779.33 was paid on or about May 31, 2013. Review of the IRS systems identified accesses to the taxpayers’ accounts by Sledge on May 23, 2013 and again in June 2013.

Multiple communications were identified to and from Sledge’s IRS e-mail account on dates between May 2013 and September 2013, relaying taxpayer information and/or internal IRS documents for up to as many as 56 taxpayers to Sledge’s coconspirators. Text messages containing taxpayer information and discussing the theft of Government funds were also identified. In one message she sent to an individual she was trying to recruit as a coconspirator, Sledge told the recipient she had a business proposition for him and indicated she had a plan to change the addresses so checks would come to him. Sledge offered to split the scheme proceeds three or four ways, depending on the number of people involved. Sledge said she would give him all the information needed to get the address changed without any problems or questions and said, “All of this money is just sitting here for the taking.”

TIGTA special agents arrested Sledge in Chamblee, Georgia on November 26, 2013. She entered a not guilty plea at her arraignment, held on December 19, 2013.

Source: U.S. Treasury Inspector General for Tax Administration (January 13, 2014)

Other Sources of Income Tax Identity Fraud

GA: “The returns were filed using the names and personal information of patients from two healthcare facilities in Georgia...”

GA: “According to court documents and evidence introduced at trial, Banks, who is a former certified nursing assistant, obtained the names and Social Security numbers of nursing home patients from her employer and conspired with Mosely...”

GA: “In her plea agreement, Blount admitted that beginning in 2010, she obtained stolen identities of nursing home patients and used that information to file fraudulent income tax returns...”

FL: “Also found in both rooms were medical records that had been stolen from a veterans hospital...”

FL: “Latonya Ware stole patients' names and social security numbers from a medical office where she worked, and gave the information to Tilus and her cousin, Andrew Ware. Rowe electronically filed fraudulent tax returns utilizing the victims’ names and social security numbers...”

GA: “The defendants obtained their victims’ information from publicly available websites that publicize the names, social security numbers, and other personally identifying information of unsuspecting individuals...”

GA: “Thomas orchestrated a scheme to file over 1,200 false tax returns using the names and Social Security numbers of various victims, many of whom were incarcerated in jails or prisons throughout the country...”

FL: “Lyon worked as a service representative for Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF). As an employee of TIAA-CREF, Lyon had access to the names, addresses, social security numbers, and dates of birth of TIAA-CREF's clients. In anticipation of a share of the proceeds, Lyon provided Martin with personal identifying information belonging to individual clients of TIAA-CREF for the purpose of filing fraudulent tax returns claiming tax refunds in those clients' names...”

Source: IRS: Examples of Identity Theft Schemes - Fiscal Year 2014

From now on, I'm going to question anyone who asks for my personal information, and those that don't really have a need won't be getting it. For example, Why does my doctor need to know my Social Security number? As long as I'm paying cash, she doesn't. I pity all the poor souls who recently published all of their personal information on the insecure Obamacare website. We'll see how that works out.

As far as trusting the IRS, that bridge is already pretty much burned to the ground. One of the greatest opportunities the federal government will ever have in positively impacting our Nation’s voluntary tax system and restoring trust in the IRS is to prosecute Lois Lerner, and if found guilty, lock her up and throw away the key.

2 comments:
  1. You might be interested (I certainly was) to know that Missy Sledge received a "100% Quality Award" from the Atlanta IRS Office. Please see page 6 on the following link: www.slideshare.net/raelowery/awards-and-recognition-16643834‎. - Via tank_sherman @ Free Republic

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  2. June 5, 2014: ATLANTA - Missy A. Sledge has been sentenced to four years and nine months in prison for mail fraud and aggravated identity theft in connection with a fraud scheme she carried out using her position as an IRS employee. - http://www.justice.gov/usao/gan/press/2014/06-05-14.html

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