Tax Roundup, 3/3/16: IRS sets up ID theft victims for another round. And: if you don’t have kids, there’s Craigslist!

March 3rd, 2016 by Joe Kristan
This convicted ID thief likely was a first-day filer.

The kind of criminal mastermind ID thief that continually outwits the IRS.

There is no bottom. Every time I think that the John Koskinen’s IRS couldn’t possibly be less competent, they prove me wrong. Identity Thieves Bypass IRS Protections for Previous Victims (Tom VanAntwerp, Tax Policy Blog):

The IRS provides an Identity Protection PIN (IP PIN) to victims of identity theft with the goal of preventing it going forward. This IP PIN is mailed to individuals at the start of tax season, and is required to file a return. But the IRS also allows taxpayers to retrieve their IP PIN online by answering the same kinds of knowledge-based authentication questions that let thieves take advantage of the older Get Transcript website.

Computer crime reporter Brian Krebs published this account of Becky Wittrock, a previous identity theft victim whose IP PIN was compromised:

“I tried to e-file this weekend and the return was rejected,” Wittrock said. “I received the PIN since I had IRS fraud on my 2014 return. I called the IRS this morning and they stated that the fraudulent use of IP PINs is a big problem for them this year.”

Wittrock said that to verify herself to the IRS representative, she had to regurgitate a litany of static data points about herself, such as her name, address, Social Security number, birthday, how she filed the previous year (married/single/etc), whether she claimed any dependents and if so how many.

“The guy said, ‘Yes, I do see a return was filed under your name on Feb. 2, and that there was the correct IP PIN supplied’,” Wittrock recalled. “I asked him how can that be, and he said, ‘You’re not the first, we’ve had many cases of that this year.’”

Wittrock noted that the IRS representative said that they would be moving away from using the IP PIN in the near future and replacing it with a different system. No details are known about how this new system might function or if it will avoid the insecure knowledge-based approach to authentication.

Through lax IRS controls, the IRS lets a thief file a return in your name. You go through a long, exasperating process to straighten things out. Meanwhile, the IRS sits on your refund, even though it promptly wired cash to the thief. Then they give you an IP-PIN and assurance that it won’t happen again. And it happens again.

I never thought Doug Shulman would lose his crown as Worst Commissioner Ever. I wish I were right about that. And they think they should regulate preparers because we’re incompetent and out-of-control.

More coverage:

TaxProf, The IRS Is Using A System That Was Hacked To Protect Victims Of A Hack—And It Was Just Hacked

Taxable Talk, The Most Terrifying Words in the English Language Strike Again

 

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TaxGrrrl, On Dr. Seuss’ Birthday, Oh, The Taxes You’ll Pay!:

More taxes!
Whether you like it or not,
Taxes will be something
you’ll pay quite a lot.

Oh, but the IRS will take such good care of it, you’ll not mind, not one little bit!

 

Peter Reilly, Tax Losses From Genetically Engineered Deer Allowed. “The purpose of the selective breeding is to get deer with really impressive head gear.”

Kay Bell, Doing the weird and wacky tax deduction dance. Yes, deer.

Leslie Book, Follow up On Clean Hands Post: The Imposition of Penalties and How Using a Preparer Does Not Automatically Constitute Good Faith and Reasonable Cause (Procedurally Taxing). “At the end of the day, the opinion is certainly a warning that merely hiring a preparer is not enough, and proving reliance on an advisor requires perhaps a bit more focus than a taxpayer’s testimony that the accountant prepared the return.”

 

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Scott Drenkard, Philadelphia Mayor Proposes Gigantic Soda Tax (Tax Policy Blog). It’s the tax that’s gigantic, not the pop serving.

Donald Marron, Budgeting for federal lending programs is still a mess (TaxVox). A good reason to not have federal lending programs.

TaxProf, The IRS Scandal, Day 1029

News from the Profession. Accounting as Performance Art? Sure, Why Not? (Caleb Newquist, Going Concern)

 

You can get anything on Craigslist! Even dependents, it seems. From a Department of Justice press release:

Tammy Dickinson, United States Attorney for the Western District of Missouri, announced today that an Ozark, Mo., man has been indicted by a federal grand jury for filing false income tax returns after he advertised on Craigslist to purchase identity information for children that he could claim as dependents.

Raheem L. McClain, 37, of Ozark, was charged in a three-count indictment returned under seal by a federal grand jury in Springfield, Mo., on Feb. 23, 2016. That indictment was unsealed and made public upon McClain’s arrest and initial court appearance on Tuesday, March 1, 2016.

The federal indictment alleges that McClain caused an advertisement to be posted on Craigslist on Jan. 16, 2015, stating:

“WANTED: KIDS TO CLAIM ON INCOME TAXES – $750 (SPRINGFIELD,MO)

IF YOU HAVE SOME KIDS YOU ARENT CLAIMING, I WILL PAY YOU A $750 EACH TO CLAIM THEM ON MY INCOME TAX. IF INTERESTED,REPLY TO THIS AD.”

In a way, it makes economic sense. It would let people whose incomes are too high monetize otherwise useless dependents. But as you might have gathered from the word “indictment,” the tax law frowns on this sort of thing.

 

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