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On Assignment: Why your tax refund is becoming a growing target for identity thieves

By Kate Snow
Rock Center Correspondent

First, a confession: I haven’t filed my taxes yet this year.  My husband and I are procrastinators. 

After working on this story, I’m more than a little worried about what we might find out when we do try to file.

For many months, Rock Center has been investigating an underworld of crime involving something that sounds really boring-- tax refund fraud.  But when you see the money these criminals are raking in and the luxury cars they drive, you’ll understand why it’s one of the fastest growing crimes in America.

It’s very simple.  Thieves steal your identity.  Somehow they get a hold of your name, Social Security number and date of birth.  (You can buy data like that on the street for $10).  Then they file a fake tax return electronically using invented numbers for your income and deductions.  Because the IRS often doesn’t verify those numbers until summertime, the thief gets a refund before anyone is the wiser.

Now you understand my fear.  Imagine you’re a procrastinator like me.  You go to file your tax return and discover that someone else has already filed in your name and received a refund from Uncle Sam.  The IRS doesn’t know who to believe.  So now the burden is on you, the victim, to prove you are the legitimate taxpayer.

It happened to Sheila Vosdoganes.  The past four years, she said, have been nothing short of “hell."

When her accountant went to file her 2009 tax return, it bounced back with a message telling her to call the IRS.  Someone had filed pretending to be Vosdoganes.  She called the IRS to try and sort it out.

“They didn't really seem interested at all in my case,” Vosdoganes said. 

“I was furious from the beginning because I felt like I had no outlet that was gonna give me a defined answer,” she said.  “I was constantly on the phone here at work, at home.  Constantly following up on it-- trying senators, representatives, anybody I could find that would lead me to a solution.  And I didn't see one happening.”

Vosdoganes did eventually receive the $5700 refund she was due, but it took months.  And even then it wasn’t over.  The very next year, someone used her information to receive a refund again.  She believes it was the same criminal two years in a row.

The IRS has made changes in an effort to help people like Vosdoganes.

In an interview with Rock Center, IRS Deputy Commissioner of Operations Support Beth Tucker said the agency has added new screening filters in its computers to flag when something might be fishy on a tax return.  And despite budget cuts, the IRS has beefed up staff in the identity theft section to deal with the increasing number of victims and tripled the number of criminal investigations over the past year.

IRS agents are also trying to cooperate more closely with local law enforcement in hard hit places.  In January, a nationwide sweep netted 389 people in 32 states. 

But Vosdognaes isn’t satisfied.  She’s nervous that her information may be used again and again to commit tax fraud.

“It's frightening because I don't know how long it will continue, when it will come back at me.  And that is something you lose sleep over,” she said.

The advice from the IRS for legitimate taxpayers?  File early.

I’ll have to try that… next year.

Editor's Note: Kate Snow's full report airs Friday, March 29 at 10pm/9c on NBC's Rock Center with Brian Williams.