Bamboozled: September 17, 2015


??????????????????Tax refund fraud has grown exponentially in recent years.

Some crooks file fake tax returns — essentially stealing a taxpayer’s identity — hoping to snatch big tax refunds before anyone catches on.

The state knows it, and it’s giving extra scrutiny to some returns. And that means long delays for some taxpayers.

That scrutiny held up the state tax refund expected by Evgeny Kobin of Basking Ridge.

Kobin said he filed his returns electronically through his accountant in late March or early April, and he was waiting, and waiting, and waiting for his $10,268 refund.

While he was waiting, he said, he communicated with the Treasury Department several times.

One time I called the state and waited 40 minutes on hold for a human being to answer the phone,” Kobin said. “They actually requested the W-2s again even though everything was filed electronically. So we sent it again.”

Finally, in August, he received the refund check, which was cut on Aug. 10.

But he had another question: Did the state owe him interest?

“If I didn’t pay my taxes in time, they would hit me with penalties and fees and interest, so for fairness I think they should pay interest,” he said, “Not that it would be a large amount of money.”

Kobin’s question is one that thousands of taxpayers are probably asking as they await their refunds.

But in Kobin’s case, the state got him his refund just in time.

It’s the six-month mark that’s key.

Interest is paid six months after the due date of the return or the date the return was filed, whichever is later, a Treasury spokesman said.

For example, if a return is filed by the April 15 deadline and the refund is not issued until after October 15, the state would pay interest from April 15 to the date of the refund, the spokesman said.

flagBut because Kobin received his refund sooner than the six months, he’s not due any interest.

We wanted to know how many refunds were outstanding, but the state wasn’t able to give us the data in time for publication. But published reports say the state detected more than 10,000 phony or erroneous refund claims last year.

Extra anti-fraud measures are being used, so this year, hundreds of thousands of returns have been examined more closely.

The increased fraud investigations are an important reason to file your taxes early, said Gail Rosen, the Martinsville-based certified public accountant who prepared Kobin’s tax returns.

“Due to identity theft, delayed processing of your tax return is the new norm,” Rosen said. “Therefore, if you are counting on the money from your tax refund, file early.”

Rosen said filing early also reduces the chance that a scammer will file a tax return in your name before you do.


If you haven’t received your federal tax refund yet, there’s slightly better news.

The IRS pays interest quicker than the state. It has a deadline of 45 days after the filing deadline to give you your refund. If it’s late, it’s supposed to pay you interest. If you file earlier than April 15, you’re no better off in the interest department because the 45-day countdown doesn’t start until April 15.

We asked the IRS to share the most recent information on refund fraud and how many refunds were delayed, but it wasn’t able to answer in time for publication.

A report by the Government Accountability Office said in 2013, the IRS paid $5.8 billion in fake refunds because of identity theft.

At the same time, the IRS said it stopped $24.2 billion in phony returns in 2013.

Just last week, the Senate Finance Committee offered up legislation intended to help the feds — at least a little — in its fight against these thieves.

The bill would give the IRS more time to inspect W-2 forms by changing the deadline for businesses to provide the forms to the agency. Right now, companies have to give employees their W-2s by Jan. 31, but the companies have until the end of February to share those with the IRS. Those who file electronically have until the end of March.

This legislation would move the deadline up by a few weeks, in theory giving the IRS more time to review W-2s and make sure everything matches.

The IRS says it is working on beefing up its security and theft detection in other ways.

Part of the plan is to establish stronger methods to authenticate taxpayer identity when returns are filed, and the hope is that it will all be ready in time for the 2016 tax filing season.

Actions under consideration include the review of the actual transmission of the electronic returns, including the improper and or repetitive use of IP addresses, which show where the return originates. It’s also looking at reviewing device identification data tied to the return’s origin, and capturing meta-data in the computer transaction that would allow for fraud review.

The IRS also says it is looking at ways to better share information between the public and private sectors — we guess that means helping the IRS have earlier access to authenticate W-2 forms and the like. It’s also asking companies that help taxpayers file returns “add layers of security and step up their pre-refund authentication practices.”

What’s your refund nightmare story? Share with us in the comments section below.

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