A decade ago, few of us had heard of identity theft. Now, most of us know someone who has been a victim. And of course, a large portion of ID theft affects tax preparers and taxpayers directly, since tax refunds are a huge target of identity thieves.
“The IRS has been paying out between $3.6 billion and $4 billion in inappropriate refunds every year,” said Adam Levin, former director of the New Jersey Division of Consumer Affairs and co-founder of both Credit.com and Identity Theft 911.
“In the first six months of 2013, there were more instances of tax ID theft uncovered—1.6 million instances—than in all of 2012, which had 1.2 million instances.”
"Organized crime has gotten into the act because it’s a lot safer than doing a drug deal,” he suggested. “You don’t have to stand under a street light late at night—you can sit in your jammies drinking hot cocoa and playing with your computer. They file as many returns as they can and hope they get lucky. All they need is a name and address, a social security number and a doctored W-2 form.”
Combining and confirming the old adage about death and taxes, a large portion of ID theft involves using the identities of dead people, according to Jean Carter, CPA, Esq., a partner at Hunton & Williams LLP.
“In 2011, for example, one thief received $12.1 million in refund claims using stolen names and Social Security numbers of 5,108 dead people,” she said.
“The unfortunate thing is that dead people notice last, and thieves know this,” she said. “In addition to tax refunds, there’s a world of digital assets out there that thieves can tap into. It’s easy to figure out who is dead simply by using obituaries. Some of these large breaches of credit card data very likely cross-referenced to deceased people to have a body of card numbers that are easy to use.”
The key to protect someone who is dead is to have someone who is alive to monitor what’s going on and take proactive steps, Carter emphasized. “Start by canceling all credit cards. It requires the executor to know what cards there are. Some of us have cards and accounts we don’t even know we have. For example you might be offered 20 percent off a single purchase if you apply for a store credit card. Many people do this, use the card once and never use it again.”
In the traditional world, you can go to a file cabinet and find bank and credit card statements and know what’s going on, Carter observed. “But transactions are increasingly being done online without a paper copy, so the executor or family member might often overlook certain assets,” she said. “It’s important to secure the various assets, and make sure no one can take advantage of the situation.”
“Thieves can exploit anything,” she said. Death gives them one more shot at it.”