Tax Fraud

April 17, 2014

Transcript:

Ted Simons: The deadline for filing taxes has come and gone but the concern over tax fraud remains. Joining us is Brian Watson of the Criminal Investigation Division, and Anthony Forschino of the Arizona Department of Revenue. It's good to have you both here, we got a lot of things to talk about. Let's get started with the ideas of scans in and of themselves. Do the scams differ after April 15th?

Brian Watson: Well, they are more common during the tax season, but they are here all year round. The telephone scam has nothing to do with tax season. People are getting calls from foreign countries saying they are under investigation, if they don't pay to the IRS they will lose their license and get arrested. People are scared to death.

Ted Simons: Is this the kind of thing we've seen in the past, is this something new?

Brian Watson: It's much more prevalent. There's always been phone scams. There's always been variation of it. There are a lot of bad people out there always trying to steal money. But this one is really rampant. We're seeing a lot, I'm based in Tucson. There's a lot in Pima County but also all over the country. They are targeting a lot of the people not born in the United States. When you use that word deportation, they get scared to death, they panic and send the money and then they find out later that money just went to a foreign country and there's really no way to get it back.

Ted Simons: And the utilities turned off and these sorts of things, is this something you would maybe see more of after April 15th?

Anthony Forschino: You might see more of that after April 15th. We continue to see the fraudulent refund all year long. People are filing tax returns. What I mean is, someone is filing a tax return for someone that doesn't exist or someone that's out of state or someone who has died and they have gotten their identity and then filed a tax return.

Ted Simons: Did you see more of this when the economy was bad? Is this the kind of thing for the economy starts to boom again we might see less of or more of?

Anthony Forschino: I don't think the economy has anything really to do with it. I think it's these rings and people are out there when we see more was the fact that we went to more electronic filing, so they have an easier way to get those fraudulent returns.

Ted Simons: The electronic filing has changed the landscape here?

Brian Watson: It's a dual edged sword. There are fewer mistakes, you get your money back faster a much better more efficient system. Same when we went to direct deposit for payroll and Social Security benefits. The down side, there are much more ways for your identity to be stolen, and it's also easier for criminals, instead of having to mail in tax returns to get the refund check they can do it from the safety of the their own house.

Ted Simons: It does sound like you have to be somewhat sophisticated to have this kind of wherewithal. We're not talking common --

Brian Watson: It runs the whole range. There are street level criminals filling it out at their house and very sophisticated rings, some of them overseas. A lot of them are using different internet techniques to hide where their internet is coming from.

Anthony Forschino: We're seeing a lot from other countries. And the state has a little different than the federal, because what's happening for us, people are taking Social Security neighbors identities of people that don't live in Arizona. They can file an Arizona return, and that person would never know the return was being filed.

Ted Simons: What kind of resources does the state have for this kind of activity?

Anthony Forschino: There is a unit, but we have our system which bounces returns against different databases. IRS databases, different databases. And plus, we have a conference every month with every state.

Ted Simons: And I think a lot of what we're talking about here, not the telephone scams but the idea of filing false returns, I.D. theft is a major factor. Talk about that, and what happens if your I.D. is stolen and your refund doesn't show up.

Brian Watson: What a lot of times happens, people file a tax return, they get a notice back saying you've already filed. The person says, wait a minute, I haven't filed, they are a victim of I.D. theft. It's painful, stressful, phone calls, waiting on hold, filling out paperwork. It's a hassle when you're a victim of identity theft, it's not like your refund's been stolen but it may take three to six months to get it straightened out. We tell people, don't have huge withholdings. You don't want to have a giant refund because, in case something is held up, you might need that money to pay rent or a mortgage and it's not good to have a huge refund.

Ted Simons: On the state level, what happens if the return is hijacked?

Anthony Forschino: If the return comes in first and then I file, we will go through the same process of making sure your identity is who you are, and you have that legitimate refund coming.

Ted Simons: I.D. theft more, less lately?

Anthony Forschino: I.D. theft is continuing to grow.

Ted Simons: Interesting. I was fascinated by the idea of fraud by tax return preparers. Goodness, gracious, talk about this.

Brian Watson: We want them to be the pillar of our financial community. You should be able to trust. The vast majority of preparers are honest, ethical, they do a great job. We have a trial going on right now just a short distance from here in the federal courthouse. A lady named LaToya Morehead. She was filing tax returns using information from former clients and using information from nonclients. So these are not mistakes. These are not, well, they did something improper. These are people with intent trying to take money from the government and using people as the vehicle to do that.

Ted Simons: As far as the state is concerned, we're talking about fraud again, talking about I.D. theft, if the tax return preparer is doing this, and it's found out, how do you learn about this? How do you know that your tax return preparer is messing around with your stuff?

Anthony Forschino: I don't know how you're going to learn it. There are a couple signs you could look for. If you go in and they tell you up front here's how much refund we're going get you, there's something wrong there or if you walk in and they tell you, I'll take percentage of what you're going to get, this person is not legitimate in the way they are preparing your tax returns.

Ted Simons: In going after these kinds of folks, is there a proactive way the state can do this, or once again, wait until you find out there's a problem?

Anthony Forschino: A lot of it is wait to find out what you can do. If we start to see tax returns that look bad and see there's a particularly preparer signed, we can go that route.

Ted Simons: And the same question for you, not just preparers, but all aspects of scams and frauds, how proactive can the IRS be?

Ted Simons: We have dedicated teams, scheme development centers. They look for fraudulent patterns they look for-- if a preparer draw as few red flags, and we look at some other numbers, we can pull some of them for audit just based on the numbers. When millions are being filed, we can see patterns. When there are certain upticks, that's usually an indicator that fraud is going on.

Ted Simons: If folks want to avoid fraud, what do you do?

Brian Watson: You need to guard your financial information, make sure your computer has protections on it. Be very careful what websites you go to, don't fall for the phishing scams. You have to protect your financial information. If you don't, you will end up paying for it later on down the road. Sometimes you do absolutely everything right and someone hacks into some company's website and you might be a victim. Don't stay up at night worrying about it, you might not be able to stop it, don't stay up worrying bit at night.

Ted Simons: Your thoughts on that.

Anthony Forschino: Same thing, watch what you're doing. Don't give any information on the phone. The IRS and us are not going to call you and ask for that kind of information.

Ted Simons: All right, thank you for joining us.

Anthony Forschino: Thank you.

Brian Watson: Thank you.