You’re a Victim of Tax Fraud — Now What?

GUEST BLOGGER

Sarah Hofmann
ACFE Public Relations Specialist

After finally buckling down and finishing your taxes, you may feel a sense of accomplishment and start thinking about how you will use your return. However, that feeling can turn into panic and confusion the minute you receive a notice from the Internal Revenue Service (IRS) that your filing has been rejected, as a return has already been filed using your social security number. You now realize that you’re a victim of tax fraud and identity theft.

Although the IRS has recently met with leaders of private sector firms, state auditors and major providers of electronic tax software in an effort to help prevent identity theft, they are fighting fraud of a formidable size. A report published in 2015 from the Government Accountability Office estimated that the IRS paid out $5.8 billion in 2013 for tax returns that were later determined to be fraudulent.

There are ways to prevent becoming a victim, such as filing your taxes as early as possible and using licensed software with strong anti-virus protection. If you are a victim, however, in spite of efforts to protect yourself, the biggest question is what to do next.

The IRS recommends that first and foremost, you immediately contact them by calling any number provided on the notice of rejection of your filing.  Next, you will need to complete IRS Form 14039, Identity Theft Affidavit. They will direct you to prove your identity, which you may do over the phone or by going to IDVerify.irs.gov. To make the process as smooth as possible, Turbo Tax suggests that you have your tax return from the prior year along with supporting documents such as W-2s or 1099s on hand. Once you've filed a complaint with the IRS, they warn that it usually takes an average of 180 days for the case to be resolved, however, most taxpayers should be able to receive their refund after that period of time.

You should receive a PIN from the IRS that can then be used for future reference to your case. As tax return fraud is also identity fraud, it is a good idea to also file a complaint with the Federal Trade Commission and to contact credit reporting agencies to place a freeze on your credit reports. It’s unfortunate, but now that you’re aware that someone has your personal identifiable information, you must be extra vigilant about your credit and accounts going forward. Identity thieves may choose to sit on your information before using it, or may sell it to a multitude of buyers who can continue to try and use it for years to come.

Although the IRS, private sector firms and U.S. Congress continue to try and develop tools and practices to thwart fraudsters, tax return fraud will likely remain a reality for millions of Americans each year and should be dealt with as swiftly as possible to prevent long-term damage to credit.

20-Year Special Agent: High level of integrity and a passion for the job remain the fraud investigator’s most important assets

MEMBER PROFILE

Ann Petterson, CFE
Senior Manager
Baker Tilly

Ann Petterson, CFE, Senior Manager at Baker Tilly, became passionate about fighting fraud at an early age. “As long as I can remember, I wanted to be a federal agent,” says Petterson. “As a child, I remember hearing about victims of an Irish Sweepstakes scam, empathizing with the victims and wanting to figure out ways to thwart the bad guys.”

What is one of the biggest lessons you have learned since becoming a CFE? 
Cressey’s Fraud Triangle. It added a new dimension to fraud fighting. The thought of profiling fraud perpetrators by being cognizant of the relevant factors that constitute the perfect environment for fraudulent conduct was an idea that was previously never within my purview. Adding Cressey’s factors to a risk assessment helps optimize the analytics.

What steps led you to your current position?  
I was employed as a Special Agent with the IRS Criminal Investigation Division for 20 years. As a financial investigator, I reviewed and evaluated financial records to determine whether a crime had been committed and, if so, to identify the perpetrators of the crime. The ability to “follow the money” is key in identifying crimes, determining motive and obtaining sufficient evidence to successfully adjudicate white-collar crime. I was also employed by the district attorney’s office and, again, I would follow the money to prove intent in murder cases, to prosecute mortgage fraud and money laundering cases, and to uncover embezzlements perpetrated by high-ranking officials of local government.

These skills have parlayed well to the private sector, where I conduct business fraud investigations, provide litigation support in white-collar crime cases, assist in integrity monitoring and apply money laundering skills to assist in regulatory compliance of financial institutions.

What is your current role and what does it entail? 
I work as a Senior Manager at Baker Tilly Virchow Krause LLP, a professional services firm, in the Business Fraud and Investigations team of the firm’s Forensic Litigation and Valuation Services group. In this capacity, I work complex tax and corporate fraud cases. Depending on the case, I am retained by either the defense attorneys or by the government to aid in prosecution. I am often called to the witness stand to testify as either an expert witness or a fact witness to help “explain the numbers to the trier of fact” (Judge or Jury). A major portion of my days are spent training young staff members on the importance of building a comprehensive set of work papers, writing detailed memoranda and properly documenting every conclusion reached.

What do you hope to personally pass on to the next generation of fraud fighters? 
Technical skills are playing an increasingly crucial role in the fraud investigation field. For the next generation of fraud fighters, the ability to conduct sophisticated data analysis and partake in computer forensics engagements will prove invaluable. However, a high level of integrity and a passion for the job remain the fraud investigator’s most important assets.

What activities or hobbies do you like to do outside of work? 
I am an avid cyclist and enjoy extended bike trips around the globe. I also like to spend time with my two grown kids.

Read Ann's full profile in the Career Center on ACFE.com.

3 Ways to Spot a Fraudulent Charity

SPECIAL TO THE WEB

Jacob Parks, J.D., CFE
ACFE Research Specialist

The sudden and vivid destruction caused by tornadoes, tsunamis, man-made catastrophes and other crises compels us to contribute to the people affected. There is a particular urgency in responding to disasters because the victims often lack the supplies or help they need to survive. As a result, donors often choose to contribute as soon as possible to a charitable organization that pledges to help the disaster victims.

But fraudsters swarm to take advantage of highly publicized emergencies, and many bogus charities that pop up under the guise of helping victims are just pocketing the donations. Worse, some organizations described as charities actually function solely to fund organized criminal groups.

Fraud involving disaster relief might be among the most immoral of financial crimes, but it happens so often that we should not be surprised or unprepared. There are many actions that individuals and organizations can take to help give them confidence their donations will not be misused.

DO THE HOMEWORK

The nature of disasters does not leave as much time for performing due diligence checks as most situations — the victims need relief right away. Even so, donors can do some research on an organization in a short amount of time using the following methods:

• Search a charity evaluation site for the organization, such as Charity Navigator or GiveWell. These sites use several factors, such as transparency and how funds are used, to rate charities. Additionally, you can find the charity’s authorized contact information to compare to what solicitors have sent you.
• Check to see if the organization is tax exempt or has had its exempt status revoked using this IRS site (or check with the applicable tax authority).
• Simply running an online search for “scam” and the name of the charity might bring up revealing results. Charity scams typically involve mass solicitations, and whistleblowers often identify potential scams online.
• If responding to a solicitation, call the charity using its official contact information to ensure that it is the true solicitor.
• Check to see if the charity is registered with a state government agency (most states require registration with the State Attorney General’s office or similar agency).

BEWARE OF CHARITIES WITH LITTLE TO NO HISTORY

Suppose you come across a charity and find no negative history, or not much history at all for that matter. Even if a new charity is legitimate, it's questionable that it has the infrastructure to effectively move the donations to the area or people in need. Every charity has to start somewhere, but disaster relief organizations are especially vulnerable to fraud and mismanagement. Finding another organization with a strong history that will suitably pursue the cause is a safer option. If no alternative exists, ask the charity’s representatives for details on their logistics for providing aid to the victims of a disaster.

HAVE AN EFFICIENT IDENTIFICATION PROCESS

Disaster relief organizations often operate at or near the disaster sites, where there is a system of procuring and distributing resources. Unfortunately, con artists are pervasive near disaster sites because there is a trust that everyone else is there to help. After Hurricane Sandy tore through the New Jersey shore, for instance, con man David Scott Ruddy convinced shelter volunteers for several weeks that he was a FEMA representative. He was not, and by convincing people that his role was to help, he allegedly bilked victims out of at least $50,000 in relief funds.

Many organizations use photo ID cards or badges for workers authorized to handle supplies and other valuable assets. The recurring theme of on-site disaster-relief scams is a person claiming to have governmental authority without any actual association with the government. Don’t be afraid to question authority; most of these schemes can be avoided by verifying a person’s credentials.

Read the full article at Fraud-Magazine.com.

Training and Networking Keys to CFE Success

MEMBER PROFILE

Terry Sumner, CFE, CFS, MBA
Internal Revenue Agent/Anti-Money Laundering Examiner
Internal Revenue Service
Dallas, TX

In a 2008 Psychological Medicine survey, speaking up at a meeting and speaking in public were ranked as the top two fears among participants. Yet Terry R. Sumner, CFE, CFS, an Internal Revenue Service’s (IRS) agent and anti-money laundering examiner, said meeting new contacts in the fraud-fighting field was one of the main reasons he joined the ACFE. He deems networking as one of the most important aspects of a fraud professional’s education. Networking, teamed with interviewing training, is this IRS agent’s one-two punch for taking out some of the most dangerous fraudsters and money launderers.

What made you decide to become a Certified Fraud Examiner (CFE) and how has the credential benefited you in your career?

I wanted the ability to interact with other fraud professionals, as well as to further my education and training. The credential has helped me to know what elements are needed for a good criminal referral, and it has increased my knowledge of interviewing and conducting investigations.

What do you enjoy most about your career as a CFE?

I most enjoy the feeling I have that I am protecting my country by detecting unlawful activity and terrorism.

In your opinion, what are some of the biggest challenges and opportunities for CFEs today?

One of the largest challenges is “thinking outside of the box” with the latest techniques that are used to commit fraud. The opportunities are both satisfaction in a job well done, as well as the ability to assist peers in new techniques used for investigations and fraud detection.

How important is networking to you as an anti-fraud professional?

Networking is one of the most important aspects to any fraud professional’s education. Many times other CFEs have detected the people or techniques for fraud I am investigating. Annual fraud conference presentations give me ideas on where to look during my examinations to detect potential fraud and where to test the business anti-money laundering program for improvements. The instructors are always ready to answer my questions both at the conference as well as during the year.

What advice would you give to someone hoping to follow a similar career path as you?

This is one of the most personally rewarding careers in the IRS. I would advise someone to get as much training in all aspects of fraud and in life experience so that they can relate to the businesses that they are examining. I would tell them to get training so they have the ability to find new methods in the commission of fraud.

Read the complete profile here.