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Amid drive against ID theft, some tax refunds face delays

Some taxpayers seeking a quick refund may have to wait longer than usual this year as the Internal Revenue Service tries to stop criminals who steal others’ identities and file fraudulent returns.

The agency, which began accepting 2012 returns Wednesday, is making its system more sensitive to signs of potential fraud, meaning some returns will get a closer look. Last year, the IRS prevented $20 billion in fraudulent refunds from being issued, up from $14 billion in 2011.

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The efforts reflect the tension in the IRS’s multiple missions, said Benson Goldstein, at the American Institute of Certified Public Accountants.

The IRS has been trying to to accelerate refunds in part to encourage electronic filing and in part to reduce taxpayers’ reliance on short-term loans. But the speed of refunds presented an opportunity for fraud.

‘‘It’s a difficult responsibility for the IRS,’’ said Goldstein. ‘‘They’re there to get the prompt refunds but at the same time to protect the US Treasury.’’

The IRS expects to meet its goal of delivering 90 percent of refunds within 21 days, said Michelle Eldridge, a spokeswoman. That compares with months for victims of identity theft.

The agency is trying to be careful and ‘‘underpromise and overdeliver,’’ said John Hewitt, chief executive of Liberty Tax Service. The IRS has long delayed refunds to prevent fraud, he said. This year’s effort, combined with late congressional action that delayed the start of filing, may slow refunds by a week, he said.

Taxpayer identity theft has become more prevalent. For fiscal 2012, the IRS’s identity-theft unit received about 450,000 cases, up 78 percent over the previous year, according to the National Taxpayer Advocate, an independent organization within the agency.

Using Social Security numbers obtained illegally, criminals generate fake wage reports and false tax returns. They focus on the start of the tax-filing season, seeking to deposit refunds on a disposable debit card or convert them into cash before the legitimate taxpayers file.

‘‘It’s a lot easier and safer for a criminal to not use a gun and go out and rob a bank,’’ Goldstein said. ‘‘It’s much easier to use a computer.”

Taxpayers whose identities are stolen sometimes wait months for their refunds.

The advocate, members of Congress, the agency’s inspector general, and watchdog groups have been calling on the IRS to do more to prevent refund fraud and assist victims. Last year, the IRS Advisory Council said it was ‘‘concerned that both taxpayers and the tax system will suffer if appropriate measures are not taken quickly.”

It recommended that the IRS withhold three-quarters of refunds until it can verify taxpayers’ identities.

For some households, a tax refund is the biggest financial event of the year. In 2012, more than 74 percent of tax filers received refunds, averaging $2,803.

This year, the IRS is introducing more of what it calls filters — rules its computers use to determine if tax returns warrant more scrutiny. The IRS said it had more than 3,000 employees focused on identity theft in late 2012, more than double the number a year earlier.

Taxpayers who think they are victims
of identity theft can contact the IRS
at 1-800-908-4490, ext. 245.
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