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FTC: Identity theft retains its throne as No.1 worst scourge in Top 10 consumer complaint list

Michael Cooney | Feb. 27, 2013
Identity theft has been the top consumer complaint to the Federal Trade Commission now for 13 years running.

" IRS captures data on the amount of money it recovers from all types of fraudulent returns, but it does not distinguish whether the type of fraud was identity theft or some other type of fraud. In some cases, external entities, such as banks or other agencies, may notify IRS of potential refund fraud, including suspected identity theft-based refund fraud. IRS reported it had received information from 116 banks and external leads on more than 193,000 accounts between Jan. 1 and Sept. 30, 2012, for all types of refund fraud. IRS reported that banks and other external entities returned almost $754 million during this period.

Another challenge is prosecuting confirmed identity thieves. While the number of cases has obviously grown, the prosecution of these thieves has not even scratched the surface. For example according to the GAO, only 898 cases in 2012 have had formal criminal investigations been instigated. The IRS typically only goes after "the most egregious and significant identity theft cases, as measured by volume and refund amounts," the GAO stated.

An audit of the IRS in 2012 found that the agency stands to lose as much as $21 billion in revenue over the next five years due to identity theft. The Treasury Inspector General for Tax Administration, which is part of the U.S. Treasury.

The IRS said it has made a significant increase for the 2013 tax season in the number and quality of identity theft screening filters that spot fraudulent tax returns before refunds are issued. The IRS has dozens of identity theft screens now in place to protect tax refunds. These efforts helped the IRS in 2012 protect $20 billion of fraudulent refunds, including those related to identity theft, compared with $14 billion in 2011, the IRS stated.


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