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The ISMA works with IRS investigators on ID theft tax scam
e-Reports, May 5, 2014
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Letter to legislators expresses concerns about fraud prevention efforts Untitled document

The ISMA sent letters to members of the Indiana General Assembly and the Indiana Congressional Delegation April 17, about the identity theft tax scam affecting physicians. The ISMA characterizes the scam as widespread, noting we have logged nearly 100 calls from physicians and believe there are many more affected.

So far, the scam appears to span all practice settings, all specialties, all demographics, all major hospital systems, and all cities. Physicians from other states also have been scammed.

Our letter indicates the Indiana Department of Revenue and the Office of the Indiana Attorney General Identity Theft Section assured us they are investigating the matter, which we appreciate. However, our letter also expresses strong concerns that we had been unable to obtain similar assurances at the federal level.

More concern about IRS vigilance
An April 15 Wall Street Journal editorial, enclosed with the letter, echoes our concern about IRS vigilance in addressing these types of tax return schemes – particularly in light of the fact that “many physicians have indicated that the fraudulent returns filed in their names contained red flags, which could have been easily spotted.”

That Wall Street Journal editorial, written by a former federal prosecutor in the Justice Department’s Tax Division, characterizes the crime as “simple and profitable.”

The perpetrators steal a name and Social Security number, file a tax return for a fraudulent refund, and direct the IRS to wire-transfer the stolen proceeds onto a prepaid debit card. The Justice Department has a name for it: “stolen identity refund fraud.”

The editorial discusses the significant enforcement efforts, including the 880 defendants charged in 2013 in such crimes, and the increased sentences imposed. But, the editorial also shines a light on the costs to our federal government, projected to be $21 billion in fraudulent tax refunds over the next five years.

Several federal legislators have already expressed interest in this issue, including Sen. Dan Coats, Congresswoman Susan Brooks, as well as Congressmen Todd Young, Larry Bucshon and Todd Rokita.

Investigation moves ahead
In another positive development, the ISMA is now working directly with a supervisor for the Criminal Investigation Unit of the IRS. Julie Reed, ISMA general counsel, said, “We are pleased to now have the personal attention of the IRS on this matter. This is a big step forward for the investigation."

Additionally, the ISMA has notified our local U.S. Attorney, Joe Hogsett, whose office prosecutes these cases.

“It is critically important that physicians continue to notify us if they were affected, so we can provide that information to the state and federal authorities. The people investigating your personal tax return at an individual level are not the same people who are investigating the widespread scam at a global, national level. We are in direct contact with the latter, who want our help,” said Reed.

“Our IRS contact also strongly encourages all persons who were victimized to file a local police report. That report will be critically important if you are further defrauded. To date, the ISMA has not heard of any physicians who were impacted in any way other than tax returns.”

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