Personal Finance

Zombies in the workplace? No, just fraud

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Nothing is certain but death and taxes—and maybe not even death, as far as the Social Security Administration is concerned.

During tax years 2006 to 2011, 66,920 people filed using a Social Security number for someone born before June 16, 1901—that is, people who would now be age 113 and older, according to a recently released audit from Social Security's inspector general. Those "centenarians" collectively reported $3.1 billion in wages, tips and self-employment income.

Pretty eye-popping considering that only 39 known living individuals worldwide are age 112 or older as of earlier this month, according to the Gerontology Research Group.

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Is it still identity theft if you're dead? "It's obviously fraudulent activity," said Paul Stephens, director of policy and advocacy for the Privacy Rights Clearinghouse. "There's no individual victim, but the fraud is being perpetrated against a government agency, or for employment purposes." Taxpayers are being harmed as a group, he said, if benefits or a tax refund are paid out to a "deceased" individual.

The issue traces back to a larger discrepancy the audit found, that 6.5 million Social Security numbers for people born before June 16, 1901 do not have a date of death on record in the administration's "Numident" system. Without a date of death properly noted in the database, government agencies and other entities inquiring wouldn't necessarily know an individual was deceased.

"This missing death information could result in erroneous payments made by federal benefit-paying agencies that rely on the DMF [Death Master File] to detect inaccurate or unreported deaths," the audit noted. "The missing death information will also hinder private industry as well as State and local governments' ability to identify and prevent identity fraud."

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In one incident, an individual was able to open bank accounts using Social Security numbers for people born in 1869 and 1893. Those folks, who depending on their dates of birth would now be as old as 146 and 122, respectively, were still listed as alive in the Social Security database.

A spokesman for the Office of the Inspector General (OIG) said no one was immediately available for an interview. A spokesman for the Social Security Administration referred to the administration's response memorandum within the report, which said it prioritizes accuracy and integrity of its payment files. "The cases identified by OIG in this report are not cases where we are making improper payments," it said. "When we receive a report of death we take timely action to terminate payment."

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It's true that most of those faux centenarians' wages weren't credited to their records for accruing Social Security and other benefits because the names on the earnings reports didn't match the number-holder's name. One Social Security number appeared on 613 different suspended wage reports during that six-year period.

Only 71 individuals had $1,000 or more credited to their benefits record in any tax year from 2008 to 2012. "In 34 cases, it appeared someone misused a deceased numberholder's name and SSN to work," auditors wrote.

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As a result of the audit, the inspector general recommended four actions to the Social Security Administration to add or correct information on the records in question. The administration agreed to complete an analysis by the end of fiscal year 2015 regarding updates to 5 million records but said completing data found in 1.4 million others "would incur significant risk of transferring inaccurate data."

For consumers, the bigger concern isn't that their identity will be stolen after they've died. It's that they're accidentally reported as dead while still living, said Stephens. It happens—and typically means you can't apply for new credit, access existing financial accounts, or receive any government benefits. "That can have disastrous consequences," he said.