• Bogus tax returns on the rise
     | June 15,2014

    The Vermont Department of Taxes is seeing an uptick in the number of fraudulent tax returns filed with the state.

    So far, the department says, it has prevented more than $900,000 from going out the door to individuals who filed more than 500 fraudulent tax returns in 2014, more than double the amount from 2013.

    Tax Commissioner Mary Peterson said a top priority for the department is guarding taxpayers and taxpayer money against tax refund fraud.

    “While the additional scrutiny affected the timing of some refund payments, it is critical to protect taxpayers,” Peterson said. “We believe our diligence has paid off.”

    Maribeth Spellman, director of policy, outreach and legislative affairs for the Department of Taxes, said in many cases those individuals filing the returns are also engaged in identity theft.

    “These people are using real Social Security numbers, personal information and, in some cases, dependent information,” Spellman said.

    In 2013, the Department of Taxes stopped approximately $440,000 in fraudulent returns. It is unclear if there are more people filing fraudulent returns, or if the department is getting better at catching tax cheats.

    Spellman said the department has begun devoting more staff to identifying returns as fraudulent, but at the same time improved data management is making it easier to verify information as incorrect.

    “We have more of a data clearinghouse now, so we can compare a W-2 form with employer information,” she said.

    In 2014, the average fraudulent return amounted to about $1,800. Spellman said it’s crucial to identify fraud before return checks are issued.

    “You have to catch them before the checks go out, because if you don’t, they’re gone,” she said.

    The rise in fraudulent returns is not unique to Vermont. Other states are also finding more fraud, and in some cases, the same individual will file fraudulent returns in multiple states.

    Vermont shares information on fraudulent returns with other states, and is also tipped off by other states when they encounter tax fraud.

    The same sort of data sharing also happens between state and federal governments.

    Spellman said that when the state identifies tax fraud, it also notifies the federal Internal Revenue Service because, in many cases, individuals will file fraudulent returns with both the state and federal governments.

    In some cases, the Department of Taxes will refer cases to the attorney general’s office. However, unlike many other states, the department does not have its own criminal investigation unit.

    Spellman said her department is notified by taxpayers that they have been victims of identify theft. Her department has heard from taxpayers who tried to file their federal tax return electronically, only to have the return rejected because a return had already been filed using their information.

    She urged anyone whose federal return was rejected for this reason to call the state Department of Taxes at 828-2865. She also suggested taxpayers check out the section on identity theft and tax scams on the department’s website, www.state.vt.us/tax.

    Another type of fraud is being perpetrated in the name of the Department of Taxes.

    Elderly taxpayers have been receiving phone calls from people claiming to represent the department and saying the taxpayer must provide payment over the phone or lose their homes.

    “Someone called an elderly woman in Ludlow and told her she had 45 minutes to pay her taxes or a sheriff was coming to evict her from her home,” said Spellman.

    She said the Department of Taxes will never contact a taxpayer by telephone or email and demand payment.

    In these situations, the taxpayer is urged to call both the Department of Taxes and the police.

    Spellman said her department makes a point of distinguishing between fraud and simple taxpayer error.

    “Vermonters, as a whole, are pretty good at meeting their tax obligations,” she said. “Sometimes, people do make mistakes, but when someone files a return saying they worked at a Target in Vermont, we know that’s not true because there is no Target in Vermont.”



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