Alabama Deputy Tax Commissioner Victim of Tax Fraud

taxes-646512_640It was a record-breaking year for tax fraud, and the big news is that the blatant criminals are not the only ones who made big bucks. Millions of dollars flowed into the pockets of companies all down the line, from the tax preparation software companies to the banks where the illegally gained money was deposited.

According to an article on KrebsonSecurity.com, “When identity thieves filed a phony $7,700 tax refund request in the name of Joe Garrett, Alabama’s deputy tax commissioner, they didn’t get all of the money they requested. A portion of the cash went to more than a half dozen U.S. companies that each grab a slice of the fraudulent refund, including banks, payment processing firms, tax preparation companies and e-commerce giants.” By following the money trail, investigators are discovering that tax fraud is big business. Our state’s Deputy Tax Commissioner is not the only state commissioner who fell prey to fraudsters. According to KrebsonSecurity.com, “several of Utah’s senior tax administration officials also were victimized by ID thieves this year.”

The IRS says they are working toward a solution, so taxpayers can feel safe once again. However, the problem may be more difficult to nip since so many are making so much money. The taxpayer is at the mercy of the IRS, the fraudsters and now the companies that make the tax return programs they use. In this kind of situation, Catch-22 comes to mind. When you see how the process works, you’ll understand also why it’s going to be challenging to put an end to the fraud.

KrebsonSecurity.com explains, “When tax scammers file a fraudulent refund request, they usually take advantage of a process called a refund transfer. That allows the third party firm that helped prepare and process the return for filing (e.g. TurboTax) to get paid for their services by deducting the amount of their fee from the refund. Effectively, this lets identity thieves avoid paying a dime to TurboTax or other providers for processing the return.” This gives TurboTax and other filing programs a very nice payday.”

Continuing to use the Alabama Deputy Tax Commissioner as an example, the KrebsonSecurity.com article continues, “In Garrett’s case, as with no doubt countless other fraudulent returns filed this year, the thieves requested that the return be deposited into a prepaid debit card account, which they could then use as a regular debit card to pay for goods and services, and/or use at ATMs to withdraw the ill-gotten gains in cash.”

What’s more, the crooks asked the government to deposit $2,000 of the $7,700 they applied for in his name to an Amazon gift card ($2,000 is the maximum allowed under the Amazon gift card program). This is just another way for thieves to hedge their bets in case the debit card to which the majority of the stolen funds gets canceled.

Garrett’s boss, Julie Magee, Alabama Department of Revenue Commissioner had this to say, “There are so many people making money off of electronic transfer of funds, it’s ridiculous. Five different financial institutions touched the fraudulent refund they filed in Joe’s name before it went to the thieves.”

Big money means a big problem with little hope for any kind of solution in the near future. Brace yourself, taxpayers, for more tax fraud to come.