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Identity Theft Tops Dirty Dozen List Compiled By IRS


The "Dirty Dozen" is not just the name of an action film from the 1960s. It's also the name of the list the IRS puts out each year documenting the most common tax scams. For the past two years, identity theft has topped the list. That's when thieves first steal someone's identity and then steal their tax refund by filing a fraudulent return.

But the problem is not a new one. Nina Olson works as an independent office within the IRS. She is the National Taxpayer Advocate, your voice at the IRS. She uses her voice to issue recommendations to the agency and she told us she's been pointing to this problem for almost 10 years.

Nino, good morning.

NINA OLSON: Good morning.

GREENE: So this crime of stealing tax returns, nothing new if you've been bringing it up for a decade. But it seems to be becoming more sophisticated now. Tell me about that.

OLSON: Yeah. I think that since we first identified it in around 2005, it's morphed. What we saw several years ago - I'd say starting about five years ago - was it really became a more organized crime, in the sense of groups of people having boiler rooms of folks, getting lists of Social Security numbers taken from hospitals, from school registers, things like that and inputting tax returns.

GREENE: If what we're looking at now is sort of more organized, who exactly is committing this fraud and how do they do it?

OLSON: Sometimes it's just a group as small as three or four people. They're working in places where you have access to lists of Social Security numbers. Now what we're also hearing from the Department of Justice that some of the more organized criminals are moving away from drug trafficking because that's a higher risk crime into this particular area. Because you can basically, for very little effort, attack our systems. Say, here's your return and see if it goes through, and if one out of 10 goes through, that's one out of 10 with very low risk until you're caught.

GREENE: What is the scope of the problem? I mean do you get a sense of how many people have their returns stolen and how many of those people can actually get their money back?

OLSON: The IRS closed almost a million identity theft cases last year...

GREENE: That's a lot. And when you say closed, are those people getting the money back?

OLSON: They're getting their refunds back. My other concern is that when the IRS says that they've closed these cases, often there are lingering issues for the taxpayer.

GREENE: So it can just be the beginning of headaches.

OLSON: It could just be the beginning of headaches. And that's one of our major critiques. The IRS, I think, has done a lot in the last five years in being able to identify these questionable returns. But those people who do get caught up in identity theft, we really don't have a holistic approach to their problem. You know, what I try to say to the IRS is, is that identity theft is a crime against the person and against something that is, there is nothing more core to your being than your identity.

GREENE: Mm-hmm.

OLSON: And then in the midst of you trying to recover all the things that happen when your identity is stolen, to have to deal with the IRS in the middle of that over and over and over again to get an issue resolved, is not something that we should be putting upon taxpayers.

GREENE: Well, part of your critique is the man and woman power at the IRS...

OLSON: Right.

GREENE: ...in terms of responding to this. I mean just to give some perspective, and this is an agency that collects 90 percent of the nation's revenue.

OLSON: Yeah.

GREENE: We're talking about almost $2.5 trillion, at least in 2012. And the IRS has what, around 3,000 employees who are looking for identity theft issues?

OLSON: Right. Right.

GREENE: Is that enough?

OLSON: Well, I think it is enough. I think they could do it better. But the thing about this is that many of those 3,000 people who are working on identity theft have come from other parts of the IRS because the IRS workforce itself over the last few years has declined by 8 percent. And, in fact, you're moving people off of answering the phones for other reasons, so we were only able last year to answer three out of every five calls that came into our main phone number.

GREENE: Any bullet points, few pieces of advice for people to avoid being victims of something?

OLSON: Yeah. You know, one thing that I really am very vigilant about in myself is challenging any time when I call up somebody and they say, well, I need your Social Security number. If it's not the tax person or it's not a bank that actually needs my number because they're going to have to report to the IRS, I challenge them. Why do you need my number? And nine times out of 10, they say, oh, well, we really don't, it's just convenient. And I think people have to be really vigilant about that because that is also one source of where these thieves are getting information. From computer databases there's somebody that has access to that and then is able to pull a printout of that and then they've got you.

I think just being very vigilant about checking your credit report. You know, every year, you can check for three major ones for free every year and you should be doing that to catch something that might be going on, seeing some suspicious activity. I think that if you feel like your identity has been compromised, you've lost your wallet or something like that, you can call the IRS. They have an 800 number that you can call and report that event yet...

GREENE: The IRS can actually watch for evidence of the fraud as you file.

OLSON: Right. We have marker, and that was a new development that they did a few years ago, so that's a very positive thing.

GREENE: Interesting.

OLSON: Yeah.

GREENE: Nina Olson, thanks so much for coming in. We appreciate it.

OLSON: My pleasure.

GREENE: Nina Olson is the Taxpayer Advocate at the IRS. Transcript provided by NPR, Copyright NPR.

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