How IRS Protects ID Thieves

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Millions of Americans have fallen victim to ID theft during tax season, when fraudsters file false returns in an attempt to steal other people's refunds.

Victims face delays in getting their real refunds, and paperwork nightmares that can drag on for months. In an attempt to survey the damage, some have asked the IRS for a copy of the fake returns, but Bloomberg reports that the agency has denied such requests, despite consumer-protection regulations intended to help victims in these situations.

The rules protecting consumers apparently conflict with tax laws that prevent its agents from sharing bogus returns and impose a penalty of up to five years in prison and a $250,000 fine for IRS workers who violate that law. "Employees face the specter of felony charges for giving out private details — including, possibly, those of the identity thieves — to those who aren't authorized," according to Bloomberg.

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Tax refund fraud has ballooned in recent years. While electronic filing has made the tedious process of filing taxes more bearable for consumers, it has also made it easier for criminals to scam the system by filing phony returns using stolen Social Security numbers. Scammers bilked the IRS out of $5.8 billion in fraudulent tax refunds in 2013, a number auditors expected would climb much higher in the most recent tax season. (Numbers haven't yet been released for 2014 returns).

Electronic fraud became such a problem this year that TurboTax briefly suspended state returns for customers in February to deal with ID theft issues.

If the IRS is of limited help to victims, that's all the more reason to make sure your information is protected. You can find some tips to reduce your risk of ID theft here.

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