Fraudulent IRS ID theft payouts in the billions

The Internal Revenue Service cracked down this week on scam artists who pose as taxpayers and claim billions of dollars in refunds each year by filing tax returns using data they have acquired through phone calls, hacks, data breaches, and emails.

The IRS issued a statement saying that it halted a malware attack that generates PINs for stolen Social Security numbers on

No personal taxpayer data was compromised or disclosed by IRS systems, according to the statement.

It’s estimated by the General Accountability Office that the IRS paid out $5.8 billion in refunds to scammers in 2013, but due to undetected fraud that number could be much higher.

Last year, the IRS rejected or suspended nearly five million suspicious returns and it stopped over a million confirmed cases, totaling $8 billion, according to Jennifer Jenkins, IRS spokesperson.

“In fiscal year 2015, the IRS initiated 776 identity theft-related investigations, which resulted in 774 sentencings,” Jenkins said. “The courts continue to impose significant jail time with the average months to serve in fiscal year 2015 at 38 months — the longest sentencing being over 27 years.”

For victims, the FTC has released a new way to report and recover from identity theft at

“I remember when the internet was fun,” said Dana Bishop of Dayton, who received a “phishing” email claiming to be from the IRS. “But now it’s gotten to be so dangerous.”

Luckily, she knew that the email was fraudulent. The email asked for personal information and appeared to be official, which worried her that others might not be so savvy.

Although it’s difficult to estimate the number of local IRS identity theft victims, one accountant found out that nine of his clients had their refunds fraudulently claimed last year.

“It’s very scary,” said J.R. Hochwalt, a partner at Flagel, Huber and Flagel in Moraine. “What I found within our office is that a lot of the doctors have been hit.”

He said that the IRS will pay the full tax return, with interest, but the process can take months.

“I had one client, it was a year-and-a-half before they got their refund,” Hochwalt said, adding that so far this year none of his clients have been victimized.

About the Author