Identity Theft: Grave Robbing for a Tax Refund
Five-year-old Benny Watters died of a brain tumor in September 2010. Ten months later, his parents tried to e-file their 2010 tax return listing him as a dependent, only to have the IRS block it based on information that made the family sick: Someone else had applied for a refund claiming him as their child. “It was almost like somebody had stolen him from us,” says his mother, Lisa Watters, of Lake Forest, Ill.
Watters went online looking for answers about how the crime could have happened. Within a few clicks she came upon Benny’s Social Security number, in a list released by the federal government. “It’s just so easy [to find], and I don’t know what purpose it serves,” Watters says.
Known as the Death Master File, the list is compiled by the U.S. Social Security Administration and contains birth dates and other sensitive information on more than 89 million deceased. The government doesn’t put the file on the Internet itself. It sells the records to local governments, hospitals, pension funds, and private companies. Because the list is considered public information, it’s legal for any buyer to post it online.
That means criminals don’t have to look very hard for names and numbers to poach. Thieves can file a fraudulent return either by claiming false income or false dependents, and request that a refund be deposited onto a prepaid debit card. Nina Olson, the U.S. Taxpayer Advocate, has called it a “relatively new tactic” in the realm of tax-related identity theft, which the IRS says has ensnared more than 490,000 victims since 2008. Once the IRS dispatches the money to a debit card, it’s hard to trace.
Social Security Commissioner Michael Astrue has said it will take an act of Congress to restrict the death file’s release to companies that meet a set of qualifying standards—which a bill introduced in the U.S. Senate would do. Yet credit reporting agencies, insurers, and other industries worry the legislation could slow their efforts to check names against the file to prevent other types of identity theft. “The faster that we can get it and the more current that information is, the more likely we can prevent the fraud that occurs in that early window right after someone dies,” says Stuart Pratt, chief executive officer of the Consumer Data Industry Association, a Washington-based lobbying group.
Watters says it took until January 2012 to get her tax return processed correctly. The IRS wouldn’t tell her who filed the fake return with Benny’s information or whether the criminal was prosecuted. The agency says federal privacy laws prevent it from releasing that information. “The IRS takes this issue very seriously and is taking special steps to assist people caught in this situation,” IRS spokesman Terry Lemons says. To prevent tax fraud, the government is using new automated filters to detect suspect returns involving the deceased. That process has flagged 91,000 questionable returns for further review so far this year.
Jonathan Agin, a lawyer from Arlington, Va., whose deceased four-year-old daughter’s Social Security number was also stolen, says he wants the death file to stop being “served up on a silver platter” to thieves. Agin says he posted about the theft on social networks for parents of children with cancer last year and heard from 14 other families with the same problem within an hour. “It’s bad enough when you lose your child,” he says. “Then to have their identity taken and utilized, it’s just a compounding injury to a family. That’s something that I don’t think a lot of people understand.”