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Florida Tax Preparer Pleads Guilty to Identity Theft and Wire Fraud

According to the Justice Department and the IRS, Ernst Pierre, a Florida tax preparer, plead guilty on April 24, 2012, to wire fraud and aggravated identity theft.  Pierre was charged with a scheme to file false federal income tax returns using stolen identity information.

Identity theft in relation to tax fraud is a fast-growing crime across the country.  One reason for identity theft’s rise may be the fact that it is relatively easy.  Experts say identity thieves generally need only three pieces of information to file a fraudulent tax return electronically: a name, a Social Security number and a birth date.  The identity thief can then make up the rest of the required information, such as income and withholding taxes, and can even have a refund directly wired to a prepaid debit card that can be used in retail stores and banks.  By the time the taxpayer and the IRS catch on to the scheme, the thief has already collected their money and moved on.

In Pierre’s case, he admitted that from October 2009 through May 2011 he filed false tax returns for clients of Tax Max, a Port St. Lucie Florida tax return preparation business he owned and operated.   Pierre obtained the names and Social Security numbers of relatives of clients for whom he had prepared and submitted federal income tax returns and then fraudulently claimed those names and Social Security numbers as dependents on other client’s tax returns as well as on his own return.  Inclusion of a dependent on a federal income tax return can result in a higher tax refund for the claimant.

This kind of identity fraud scheme can cause serious problems for the real taxpayer, as they will often find themselves barred from filing their taxes and claiming their refund if the IRS’ computer system shows that someone has already filed under their Social Security number.  In response to this issue, the IRS has sought to implement additional measures to protect the taxpayer.  A taxpayer who has been the victim of identity theft can file Form 14039, the IRS Identity Theft Affidavit, which allows the IRS to identify and mark an account to monitor for future questionable activity.  The IRS has also developed a pilot program designed to lessen delays for past tax return fraud victims who deserve a refund.  Participants in this program are assigned an Identity Protection Personal Identification Number (“IP PIN”) to verify that a return is being submitted by the actual taxpayer and not by someone who has stolen that taxpayer’s identity.  Finally, the IRS has erected electronic filters that are designed to identify and cull fraudulent tax returns before any refunds are sent.

Unfortunately, not all of these changes have been implemented smoothly.  Apparently, the above-mentioned filters blocked approximately 140,000 legitimate tax returns this year.  The people who filed the blocked returns were sent a letter directing them to call a special number; however, the IRS had not sufficiently staffed this line, meaning that many callers could not get through, and those who did had to wait on hold for more than an hour to speak with a representative.  In regards to the IP PIN program, an estimated 9000 of the 250,000 letters that were sent to taxpayers containing the numbers were returned to the IRS as undeliverable.  As a result, those people may have no way to know why their electronic returns are being blocked.

Obviously, identity theft and tax return fraud are issues that needs to be sternly addressed.  However, the methods by which this will be effectively accomplished with minimal interference to legitimate taxpayers how yet to be determined.  If you are having trouble claiming your refund, you may want to contact a knowledgeable Florida tax attorney who can help you navigate the issue.