$21 billion in potential losses due to tax refund scams

While working as an IRS employee, Nakeisha Hall, used the names, dates of births, and social security numbers of tax payers to file over $400,000 of fraudulent tax returns over the course of three years.

She didn’t need other required information such as companies people worked for, how much they earned in that tax year, or a bank account number. In fact, all the refunds Nakeisha Hall collected were placed onto prepaid debit cards.

Nakeisha had the luxury of working at the IRS to easily acquire personal data, but she isn’t the only person wise to this scam. This IRS estimates $21 billion in fraudulent tax refunds.

To help reduce that $21 billion number, the IRS has implemented the Protecting Americans from Tax Hikes Act (PATH Act).

Starting January 2017 the IRS must hold onto all early tax filer refunds until February 15th. Specifically, only the refunds with the Earned Income Tax Credit or Additional Child Tax Credit included.

A majority of these fraudulent tax refunds occur early in the season. So while Good Samaritan Jane and John Doe wait for all necessary paperwork to accurately report their taxable income, someone else has already falsified their employment, wage, and banking information and filed their taxes using Jane and John’s identities.

By the time Jane and John file their taxes, that scammer has already collected the good Samaritans’ tax returns with incorrect employment information, inflated numbers, and a prepaid debit card number instead of an account number.

Although the PATH Act has good intentions, it’s still too easy for scammers to not only create fraudulent tax filings, but also acquire funds.

Because of this, the IRS has sent out an advisory: adjust your withholding now so you do not need a refund check at all.

While this strategy can help tax payers avoid hardship due to the delay in the new early filings rule or refund check delays due to identity theft, scammers will still be using false data for employment, wage, and bank information to easily acquire Good Samaritan refunds.