Fraudulently-filed tax returns in the U.S. garnered major media attention this year, but stolen identity return fraud (SIRF) is nothing new, having been steadily rising since 2005, according to Advisen Loss Insights Database. However, with the announcement this week that some 100,000 taxpayers accounts were accessed by cyber criminals, 2015 is likely to be a new high for tax fraud, with estimates that 15,000 tax returns issued to the wrong people by the Internal Revenue Service (IRS).
Case counts spiked in 2013 and dropped in 2014, according to data tracked by Advisen. Previously, an increase in return fraud in 2009 marked a 10-year high. Many of the cases in the past decade involve devious tax preparers, former IRS employees, and criminal networks stealing personal financial information.
It’s significant to note that while criminals managed to wrest fraudulent tax returns from the IRS by obtaining tax information through the agency’s “Get Transcript” application, there’s no indication that the IRS itself was not hacked. Rather, the stolen identity refund fraud should be considered a consequence of other data breaches that have occurred through which thieves accessed consumers’ Social Security numbers, names, and addresses. The graph above shows that the data theft and identity theft are the most common results of IRS-related cyber cases, demonstrating the highly tempting target this sort of fraud presents to criminals.
As one might expect, the type of loss in IRS-related cases is almost entirely personal financial identity, with personal privacy a distant second. With tax filing season running annually from early January to April 15, criminals have a broad opportunity to cut consumers off before they get a chance to file.
Advisen data showed that tax fraud nets a tidy sum for the criminals involved and racks up costs for the IRS attempting to reimburse taxpayers. Nearly all cases will end up costing over close to $10,000, with one case ultimately carrying a price tag of $21 million. In that event, a scheme running from 2005 until 2014, several co-conspirators managed to steal the personal information of thousands of taxpayers, requiring the IRS to pay $10 million to the victims, with $21 million standing as the actual losses.
Erin is the managing editor of Advisen’s Front Page News. She has been covering property-casualty insurance since 2000. Previously, Erin served as editor-in-chief of The Standard, New England’s Insurance Weekly. Erin is based in Boston, Mass. Contact Erin at [email protected].
