Tax Season Is Coming: Avoid Fraud and File Early

Source: http://www.flickr.com/photos/68751915@N05

Source: http://www.flickr.com/photos/68751915@N05

Here’s one effect of the partial government shutdown that is still complicating the lives of many Americans: the 2014 tax filing season has been delayed. The vast majority of operations at the Internal Revenue Service were shut down for the 16-day snafu in October, and the nation’s tax collectors are still playing catch-up. The filing season will begin on January 31, about 10 days later than usual.

Granted, a relatively small number of people file taxes well in advance of the April 15 deadline, but it’s important that the IRS get its house in order before processing refunds. While some Americans filing early rely on a timely tax refund to replenish savings after the holiday spending season and others are not afflicted with chronic procrastination, those committing tax refund fraud also tend to file early. All systems must be normal if the IRS and its team of investigators are to have a hope of protecting taxpayers from fraud.

If you have never been the victim of identity theft, it may be easy to miss the enormity of the problem. Tax refund fraud alone affects millions of people every year and costs the government billions of dollars. In 2011, fraudsters stole more than $3 billion from the government via an estimated 1.1 million false returns.

In that same year, the IRS blocked more than 12 million false refund claims worth more than $40 billion. For some context, that’s more money than Goldman Sachs raked in last year. Without the 3,000 or so investigators and enforcers at the IRS and many more spread across the U.S., financial gangsters would be committing so much fraud it would make even the most callous Wall Street fat cat blush.

The IRS has provided anecdotes about some notable cases from the past year. Among them is the self-proclaimed “First Lady” of tax fraud, who is estimated to have defrauded the government for $2.2 million and was arrested in July. In another instance, an identity fraud ring filed returns worth about $3.7 million.

The IRS reports that it has flagged potentially fraudulent returns worth $1.3 billion for fiscal 2013. Thanks to increased enforcement, the amount of fraud being caught should go up while the amount successfully being committed goes down.

So with the start of tax filing season still ahead of us, it may be prudent to get documents together and file taxes as soon as possible. Getting legitimate paperwork in with the IRS before any potential fraudster can could help reduce future headaches.

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