It's That Time of Year to be Wary of Tax-Refund Fraud

Watch out for Tax-refund Fraud
Drew Breakspear

Commissioner Drew Breakspear brings more than 40 years of experience to the Florida Office of Financial Regulation, having worked in the international banking industry and management consulting. He most recently served as executive vice president and general auditor at State Street Corporation in Boston, joining the company in 1995. Previously, he worked at First Nationwide Bank FSB in San Francisco, Citicorp/Citibank N.A. in New York and as a management consultant at Touche Ross & Company in New York.


Tax-refund fraud is a growing epidemic in our country and our state, becoming the third largest theft of federal dollars after Medicare/Medicaid fraud and unemployment compensation fraud. A report from the Treasury Inspector General for Tax Administration cites that in calendar year 2010, there were 440,581 reported incidents of tax-refund fraud. In calendar year 2011, that number grew to 1,125,634 — a 115 percent increase. 

As Floridians prepare to file their tax returns, many may unfortunately find that someone has stolen their identity and already filed a fraudulent return under their name. According to the Internal Revenue Service, Tampa currently has the highest concentration of tax-refund fraud in the country, with Miami coming in second. But it is happening throughout Florida, including the Panhandle. 

In recent years, the Florida Office of Financial Regulation (OFR) has seen an uptick in the number of check cashers being presented tax-refund checks resulting from a fraudulent tax return filing. Fraudsters are using stolen Social Security numbers to file fraudulent tax returns and then cashing the refund check. In these scams, the person presenting the check is not the true taxpayer. Check cashing services are more frequently used to cash the fraudulent refund check, in part because the criminals might believe the transaction will be more closely examined at a financial institution and a checking account is not required. Many of our citizens use check cashers to cash checks, including tax-refund checks.  

Licensed check cashers provide useful and needed services to our citizens. The OFR has alerted check cashers throughout the state to be aware of these potential scams. In the 16 counties of Northwest Florida, there are 111 registered check casher locations. We continue to encourage these businesses to be on the lookout for persons cashing checks with addresses that are not in close proximity to their business. 

One of our top priorities is to work with our partners at the IRS, FBI and other law enforcement agencies to put together cases against those who perpetrate this fraud in Florida, thus harming the citizens of our state. New legislation was passed last year that requires check cashers to log any checks cashed in excess of $1,000.  In addition to the check amount, each business is required to submit traceable information such as payor, payee, fee charged and the type of identification presented. The law also provides that multiple checks accepted from any one person in one day totalling $1,000 or more must be aggregated and reported. This allows us to work with our state and federal partners to prevent and fight fraud.  

Many Floridians plan to use their tax refunds for vacations, major purchases and to pay bills. Citizens whose identities have been stolen and have had a fraudulent return filed under their name often have to wait longer to receive their tax-refund, putting additional financial pressure on the Florida economy and citizens. These waits to resolve such a fraud can be six months. 

We understand it is critically important for our citizens and for the financial health of our communities that Floridians practice good financial fitness and prevention. As a part of our mission, the OFR is committed to educating Floridians on best practices for their financial services activities as well as alerting them to fraudulent activity occurring in the state. Floridians can avoid becoming a victim of tax-refund fraud by following some of these simple, but important, steps to secure their identity. 

File your tax returns early. Begin collecting the necessary information and file your return as soon as possible. 

Shred any paperwork that comes to your home or office that contains sensitive information, including your name, address, social security number and/or account information. Do not throw it in the trash or recycle bin.

Never give out sensitive information to anyone over the phone that you have not verified as a legitimate source. 

If you have reason to believe that you have been a victim of tax-refund fraud, you should contact the IRS. 

Federal dollars are our hard earned dollars paid as taxes over the course of the year. It is important that citizens and businesses alike do their part to prevent fraudsters from impacting themselves, as well as our economy.