According to the New York Times (Lizette Alvarez),
With nothing more than ledgers of stolen identity information — Social Security numbers and their corresponding names and birth dates — criminals have electronically filed thousands of false tax returns with made-up incomes and withholding information and have received hundreds of millions of dollars in wrongful refunds, law enforcement officials say.
The criminals, some of them former drug dealers, outwit the Internal Revenue Service by filing a return before the legitimate taxpayer files. Then the criminals receive the refund, sometimes by check but more often though a convenient but hard-to-trace prepaid debit card
This has been so lucrative for the thieves, that some of them are driving fancy cars. The rate that this has been going on has been increasing exponentially, so that, this year, the Service has already caught about as many false ones has had been for the whole of 2010–even though they are 30% through with the checking.
It’s clear that everyone will need a government-issued PIN going forward. I’m not sure why it wasn’t before, but the Republicans love to starve the IRS, so I suppose the explanation begins there.
Do you wonder, as I do, whether the identity thieves file a legitimate return, using their own names, to report all the ill-gotten income? That’s how the government finally caught Al Capone.