By now, we’ve all heard that fraudsters are stealing identities of the deceased to collect tax refunds; but think about this take on it: stealing the identity of a deceased tax preparer to file fraudulent returns. (Fraudsters love the deceased. No complaints.) It seems like the most logical thing to do. Where’s the risk? Once government investigators catch wind of the criminal activity, they’ll start to look for the tax preparer. Of course, a true fraudster is working all the angles and believes that when the preparer of these returns turns out to be deceased, the real perpetrator will off the hook. That’s the basic scenario alleged in today’s Fraud of the Day from AccountingToday.com.
The article reports that a 46-year-old New Jersey man was arrested for allegedly filing “hundreds of phony federal income tax returns using the identity of a deceased tax preparer.” According to authorities, the defendant purchased a tax preparation business in late 2008 from the deceased owner’s widow. Per the agreement, the defendant was to obtain his own unique Electronic Filing Identification Number (EFIN) under the company’s name. (Ah, I don’t need one of those. This business comes with one.) Authorities say he ignored this stipulation and use the deceased preparer’s EFIN because his criminal record prevented him from getting his own EFIN.
According to court documents, the defendant used the deceased man’s EFIN to allegedly file 657 fraudulent income tax returns between 2008 and 2009 by using real taxpayers’ identities without their knowledge. Each return allegedly contained false income and deduction information and allowed the defendant to have refunds directly deposited into his bank account. (Hmmm…if true, did he think that no one would notice? Authorities say he bilked 657 people and had their refunds go straight to his doorstep. Not exactly the plan of a criminal mastermind.) In just one month, the defendant allegedly had $373,938 wired into his bank account from the fraudulent returns. Records indicate he used these funds for extravagant luxury items including goods from luxury retailers, season tickets to attend football games and several high-end luxury vehicles. (Fraudsters and their fancy wheels. Just gotta have them!)
The defendant has been charged with one count of tax fraud and one count of identity theft – each punishable by up to five years in prison and a $250,000 fine. (What about the other 656 potential cases?)
This article identifies a potential scam that we haven’t seen before, but it certainly seems like a plausible approach for a fraudster. Here at Fraud of the Day, we want to draw attention to different approaches fraudsters might use – and the solutions to prevent them. As with many frauds, the key to tripping up a fraudster in a case with a scenario like this is data. If, as in the scenario outlined by the article, 600+ tax refunds are all deposited into the same bank account, shouldn’t that raise a couple of red flags? More importantly, if it wouldn’t raise red flags in your system, why wouldn’t it? Answer that question and that’s the solution to preventing this type of fraud from happening.