The Sun Sentinel

By William E. Gibson, Washington Bureau

September 9, 2014 

Congress is moving to crack down on tax-return fraud, a form of identity theft that has exploded across Florida in recent years.

The House passed a bill this week introduced by U.S. Rep. Debbie Wasserman Schultz that would toughen penalties and widen enforcement to try to spare taxpayers from losing thousands of dollars of refunds.

Investigators say many victims don't realize their identity has been stolen until they learn that someone has used their Social Security numbers to file false tax returns.

Fraud cases of this kind nationwide nearly doubled last year, from 1.1 million to 1.84 million stolen tax returns. It has cost the U.S. Treasury or taxpayers nearly $9 billion in the last two years and $21 billion in the last five years.

Much of the tax fraud is centered in Florida, where local police are overwhelmed by cases of identity theft.

"We've gotten thousands of complaints just in Broward Countyalone," said sheriff's Detective Mitch Gordon. "It's all over the state — Tampa, Orlando, down here — major problems. We find people walking around with hundreds of names and Social Security numbers. One Social Security number could be worth $10,000. The potential loss is great. And if [perpetrators] get a slap on the wrist, they will do it again."

Orlando police say they've received significant numbers of complaints of tax-return fraud but don't keep track of them and refer victims to the IRS.

Thieves steal identities in many ways, such as hacking into computer systems, stealing wallets and mail, obtaining records through phony e-mail or phone solicitations or conning businesses and charitable groups to turn over records. Crooks then use the information to file tax returns.

"Even though victims of tax-return theft eventually are reimbursed by the U.S. Treasury, it takes many months and a lot of frustration to set things straight," Wasserman Schultz, D-Weston, told the House. "Many of these victims rely on a timely tax return just to pay the bills."

The House passed her bill on Monday by voice vote. The Senate is expected to pass the same measure. It's a rare case these days of a divided Congress supporting legislation across party lines.

The bill would add tax-return fraud to the list of offenses under a law that governs aggravated identity theft. That would add five years to the maximum prison time per identity theft and gives greater leeway to prosecutors to seek stiffer penalties. It also would expand the definition of identity theft victims to include businesses and charitable groups.

Florida by far had the highest rate of identity theft in 2012, based on the latest available numbers from the U.S. Attorney's Office in South Florida. The statewide rate of 361 complaints per 100,000 residents was dwarfed by the rate in Miami: 645 complaints per 100,000.

High-profile cases in recent months include Derek Denesevich of Lauderhill, who was accused in July of paying a former Broward Countycourt employee to steal drivers' identities from a state database and using them it to file fraudulent returns and seek refunds.

In another case, Jeffrey Groover of Delray Beach, who in 2004 advised a U.S. Senate committee on how to prevent fraud, was convicted last year of making false claims to the IRS. He tried to cash $350,000 worth of fraudulent refund checks in the names of 50 victims of identity theft.

In March, Norman V. Charlton of Polk County pleaded guilty to conspiracy to commit wire fraud and aggravated identity theft for using stolen Social Security numbers to file false tax returns. He and 24 others allegedly victimized nursing-home residents to collect their refunds, prompting a judge to seize $325,886 of proceeds from the fraud scheme.

"Right now this theft is seen as low-risk and high-reward by identity thieves," Wasserman Schultz said. Tougher penalties will deter some of these crimes, she predicted.