May 13, 2012

Tax cheats steal IDs via public list of dead

WASHINGTON - Benny Watters, 5, died of a brain tumor in September 2010. Ten months later, when his parents sought to file their taxes and claim him as a dependent, they found that an identity thief already had done so, using government data about Benny's death on a fraudulent return.

"It was almost like somebody had stolen him from us," said his mother, Lisa Watters of Lake Forest, Ill., who described how she quickly found the data needed to co-opt her dead son's identity on the Internet.

The information about Benny and more than 89 million other people resides in the Social Security Administration's Death Master File, a compilation of records the agency uses to stop paying benefits and start paying survivors after people die. Updates to the file also provide raw material for identity thieves who obtain tax refunds before the legitimate returns arrive at the Internal Revenue Service.

U.S. lawmakers working with identity-fraud victims are trying to limit or prohibit access to the Death Master File. The most restrictive proposals are meeting resistance from credit-reporting companies, pension funds and life insurers that use the data to prevent fraud and administer benefits. A House panel held a hearing on the subject Tuesday.

The IRS must balance accuracy and fraud prevention with taxpayers' need to get their returns and refunds processed quickly. Once the IRS sends a refund to a disposable debit card, the government's money is gone, said Sen. Bill Nelson, D-Fla., who sponsored legislation that would limit access to the file.

More than 460,000 people have been the victims of tax-related identity theft since 2008, according to the IRS. The agency has been trying to flag deceased taxpayers' final returns and prevent anyone else from using those Social Security numbers. As of mid-March, it had stopped 66,000 returns this year for that reason.

by Richard Rubin - May. 8, 2012 11:24 PM Bloomberg



Tax cheats steal IDs via public list of dead

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