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Stay alert for tax fraud
e-Reports, March 23, 2015
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File your tax returns now and do it electronically to help prevent tax fraud Untitled document

Remember last year’s tax season? Early in 2014, fraudulent 2013 federal and state income tax returns were filed using physician names, addresses and Social Security numbers. The ISMA issued several alerts early in the year about the income tax scams impacting members. To review what happened, see the ISMA website.

“Several months ago, the ISMA started receiving calls about 2014 tax returns,” said Julie Reed, ISMA general counsel. “Be diligent in monitoring for tax fraud and use the resources available to protect yourself if it occurs. Also, note that the tax fraud scams from last year were in no way related to the ISMA, and for various reasons, it is unlikely the fraud this year is related to the mid-February theft of insurance data from the ISMA. Among other things, most fraudulent tax returns are filed well before mid-February.”

Identifying potential tax fraud
We can learn from the past experiences of Indiana colleagues. In 2014, physicians reported they first became aware of a problem when they:

  • Received letters from the Internal Revenue Service (IRS) or Indiana Department of Revenue (DOR) advising them of potential fraud, or
  • Had their tax returns rejected when attempting to file their taxes electronically because someone had already filed using their Social Security number, or
  • Received a tax refund check in the mail before filing their tax return, or
  • Learned someone had opened a prepaid card in their name in order to receive a fraudulent tax refund

What can you do?
Do not wait until the last minute to file your taxes. “Some physicians will not become aware they have been victimized until they attempt to electronically file taxes – and those returns will be rejected,” said Reed. That will necessitate generating and (timely) mailing a signed paper return. “And, the longer you wait to file your return, the more opportunities there are for a perpetrator to file fraudulently before you,” Reed added.

The DOR recommends filing your tax returns electronically in order to prevent tax fraud, as a paper filing is handled by dozens of people before reaching its destination, increasing the risk of fraud.

Also, safely store your tax return documents on a protected CD, USB drive or external hard drive and then delete the documents from your computer. Shred any documents containing personal information.

What is the government doing?
Last year, the DOR hired eight new tax investigators whose only job is to uncover fraudulent claims. As a result, some 2014 fraudulent claims were successfully identified before they were actually filed. Others were not identified until after they were filed. Physicians affected by the scam were required to file paper returns and their refunds were delayed.

Indiana DOR is using two new screening services to process tax returns this year. These tools help identify and flag fraudulent returns before processing. The DOR expects about 5 percent of those filing in Indiana to receive letters about their returns, informing them to confirm their information through a website or phone call. Some of these letters will be sent randomly and not a result of identity theft. These taxpayers will be required to take a two-minute “Identity Confirmation Quiz” about their identity. The IRS does assign a six-digit pin number to those with resolved cases of identity theft as a verification when filing future taxes.

2015 IRS projections
In its Feb. 5, 2015, EO (Exempt Organizations) Update, the IRS publicized its “biggest tax scams for the 2015 filing season.” Included on its “dirty dozen” list again in 2015 is identity theft by criminals filing fraudulent returns using someone else’s Social Security number. See the IRS website.

The article talks about steps the IRS is taking to further prevent identity theft, but admittedly, more work remains. The article also provides tips to protect yourself from identity theft.

If you become a victim
“If you suspect that you have become a victim of tax fraud, there are important steps you must take and notifications to make,” Reed cautioned.

The ISMA website has a listing of those steps to assist you; visit here.

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