Susan Tompor: Tax refund fraud can happen again and again

Detroit Free Press Money section columnist Susan Tompor. (Jessica J. Trevino/Detroit Free Press/TNS)
Detroit Free Press Money section columnist Susan Tompor. (Jessica J. Trevino/Detroit Free Press/TNS) TNS

Tax-related identity theft is a scam that can hit you from all directions. And tax fraud lightning can strike twice, too.

Refund fraud is again a hot topic this tax season. And we still have more than a month until April 18, the filing deadline for most taxpayers this year.

The Internal Revenue Service even had to halt the online service it has in place to help protect tax filers who were fraud victims in earlier years. Cyber crooks had figured out a way to break into that system and re-victimize some of those same taxpayers. The

crooks are just that daring.

Some taxpayers are already worried they're going to get hit again this tax season. Some already know it.

We're hearing more stories of other hacks this tax season, too, including the IRS admitting that many have been victimized via a transcript fiasco.

Melanie Duquesnel, president and CEO of the Better Business Bureau serving eastern Michigan, was a tax fraud victim last year.

She was a victim of the massive cyber security breach at the U.S. Office of Personnel Management. She worked decades ago for the Small Business Administration and her information was still in the organization's database despite her changing jobs years ago. Her personal ID, including Social Security number, was one of millions of IDs in the federal database hacked last year.

She is convinced that's how a con artist was able to craft a tax return last tax season using her Social Security number and other key information. In reality, Duquesnel and her husband were owed a very small refund of less than $15 last year. But crooks filing fake returns claim generous tax credits to cook up inflated tax refunds.

Duquesnel and her husband are now preparing for what could happen this tax season. They're in contact with their tax preparer, as well as a taxpayer advocate service representative at the IRS.

Once a victim, it can be possible to be a victim again.

"They still have the numbers," Duquesnel said.

In some cases, she said, it can turn into a game for the con artists of, "Let's just see if this works again."

Faye Ball, the owner of The Taxlady & Co. in Wyandotte, Mich., said consumers must take several steps if they run into tax-related ID fraud. She tells clients to put a fraud alert on their credit reports by contacting one of the three major credit reporting agencies.

Tax fraud victims also should contact any institution that would be directly affected by the fraud, she said. That includes contacting the IRS tax fraud hotline at 800-829-0433.

Other steps include filing an affidavit with the Federal Trade Commission and filing a police report with local law enforcement.

Mark Ciaramitaro, vice president of tax products for H&R Block, said it can take anywhere from six months to a year for some tax refund victims to get their own tax refunds as the ID theft mess is investigated.

The IRS has issued IP PINS to 2.7 million tax ID theft victims. This six-digit PIN is then used on the following year's tax return so the IRS can accept that return as a legitimate return -- not something filed by the fraudsters.

But an online tool that's used by people who lost their IP PIN numbers seems to be too easy for the cyber crooks to use. The online questions apply to personal financial information about you, such as where you lived in the past and what size of mortgage you held at one time.

Some of that data, though, can be found elsewhere by the crooks either legitimately or through stolen databases.

To crack down on the cyber thieves, the IRS recently stated on its website that its online IP PIN tool is no longer available until further notice.

The IRS said that this year about 5 percent of the people with PINs -- or 130,000 accounts -- had used the online tool to retrieve lost or forgotten IP PIN numbers.

As of the end of February, the IRS said it had stopped about 800 attempts to use stolen IP PIN numbers to file fraudulent tax returns.

Michelle Quinn, 33, was a victim last tax season -- and she's already discovered someone filed a tax return using her ID this tax season, as well.

Last year, Quinn's $8,000 tax refund was hijacked after someone hacked into a system and stole her refund before it could be directly deposited. After a long battle, she got her money.

This January, Quinn, who lives in the Hudson Valley region in New York, said she tried to file her return online when tax season opened. The idea was to file a return as quickly as possible to beat the cyber crooks who wanted to impersonate her.

Her legitimate tax return was immediately rejected. The IRS already had another return on file with her Social Security number.

The crooks beat her to it.

So this year, she's stuck waiting for federal and state income tax refunds totaling about $9,300.

"People feel like if it hasn't happened to them, it won't happen to them," Quinn said. "It can happen to anyone any time in any way."

Susan Tompor, the personal finance columnist for the Detroit Free Press, can be reached at