Garcia: Identity thieves do taxes and keep refund 

Most people are delighted to get a tax refund around this time of year, during the annual dance with the Internal Revenue Service.

At least that’s the case when they file theirtaxes for themselves. When strangers do it for you — and then pocket the cash — the feeling is quite different.

Just ask Will and Gracie Tan, a Daly City couple who are trying to recover from a very bad start of a year that began with an identity theft case, resulted in crooks making a huge dent in their banking account and then the discovery that possibly a related group of criminals took their personal information and filed phony tax returns in their name. Their case is hardly isolated — IRS officials and tax preparers say this may be a banner year for tax fraud — but it’s hardly reassuring to know just how sophisticated computerized theft is becoming.

"It’s been a truly scary experience because so many things happened together that we don’t really know what to expect next,’’ Will Tan told me. "We thought the worst was over and then we discovered what happened with our taxes.’’

Late last year the Tans refinanced their home, providing lenders with a complete disclosure of all of their financial information, personal data and the numbers associated with their accounts. They thought nothing of this normal chain of events until Gracie decided to call Macy’s in January, inquiring about a refund due to them.

"A refund?’’ she was told by a store clerk. "Our statements say you have a bill due for $1,500.’’

Within a four-day period, they discovered that whoever had the information to bill something on their Macy’s account was busily trying to open a number of other credit cards, and that $5,000 was missing from their checking account. By the time they could put the brakes on their burgeoning financial nightmare and freeze all of their accounts, they had lost more than $15,000 to a group of scam artists based in El Paso, Texas.

The Tans had to go through the arduous process of reestablishing new credit accounts and making sure that Bank of America reimbursed them for all the money that was taken. And then, not long after dealing with the plight of being victims of identity theft, they received the information that their tax refund should be on the way.

There was only one problem — they hadn’t filed yet. So their refund was good news only to someone else.

If this has something of a familiar ring to it, it should. The Examiner reported recently that the number of fraudulent tax filings is on a steady rise, with tax cheaters using computers to create fake W-2 forms that IRS officials admit are nearly identical to the real thing.

"They’re getting quite sophisticated,’’ said Arlette Lee, a spokeswoman for the Northern California office of the IRS’ criminal investigations unit. "This is the first year we’ve seen the number of fraudulent filings so huge. But it’s not just here, it’s all across the country, and we’re trying to come up with a plan to attack this.’’

But that will likely provide little solace to the Tans and the countless other victims of tax fraud because once a fake tax form has been filed through a tax preparation firm, you can’t file electronically. So for those who didn’t discover that phony forms had been filed in their name, it creates a bureaucratic nightmare in dealing with the IRS.

The Tans are still grappling with their tax situation, but they’re hopeful that the worst is over. Will Tan told me that they’re moving ahead with their lives, but admits that it’s a shock to see how vulnerable people are once their personal financial information gets into the wrong hands.

"When you think about all the information out there and how people could lose all their money in retirement accounts, all the money they’ve saved all their lives, it’s really scary,’’ he said. "We had a group that knew exactly what to do in a short period of time. And if my wife hadn’t made a random call to Macy’s one day, there’s no telling what might have happened. I’m sure a lot of people have experiencedmuch worse.’’

Given that the Tans suffered through identity theft, fake credit cards in their name, had their bank accounts raided and then had to learn that their tax refund was going to someone else, it would be hard to imagine a scenario more troubling for a typical middle-class family.

For if there’s no certainty left with regard to filing your own taxes, then according to the old adage, the only thing left for us to count on in life these days is death.

Ken Garcia’s column appears Tuesdays, Thursdays and weekends in The Examiner. E-mail him at kgarcia@examiner.com or call him at (415) 359-2663.

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