Rock Center   |  March 29, 2013

Billions stolen in tax refunds, anyone is vulnerable

Tax refund fraud is now one of America’s fastest growing crimes. In this two-part report, Rock Center’s Kate Snow investigates how identity thieves are making billions by filing fake tax returns.

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This content comes from Closed Captioning that was broadcast along with this program.

>>> americans are expecting a tax refund this year, but some taxpayers, an increasing number of them of late are going to learn their refund has instead been stolen. part of a scam network that grabs the money right out of the irs . it's growing fast, it's brazen, hits people in every walk of life . kate snow has our report.

>> the tampa bay area , probably best known for its warm weather and white sandy beaches, but these days, the city of champions has another claim to fame as ground zero for an epidemic sweeping the nation. it sounds mundane, but tax refund fraud is one of america's fastest growing crimes.

>> initially when we saw it was certain areas of tampa, then it was the whole city, the whole county, the surrounding counties, the whole state of florida and it just took off.

>> reporter: detective drove us through the area where the fraud is so lucrative, it surpassed the drug trade .

>> how you doing?

>> reporter: no gunfire or car chases necessary. just takes a few clicks of the mouse.

>> a drug trafficker said i can sell a kilo or two of cocaine, make 5 or 10 grand. i have to be worried about being arrested. tax returns , smitten a day, i've made myself $40,000, $50,000 a day, and watch cartoons what i'm doing. no stress.

>> reporter: you have guys trading guns for laptops?

>> exactly.

>> reporter: a thief steals your identity, name, date of birth, social security number and then they file a fake return with the irs and obtain a refund. how easy to steal someone's identity and file a tax return ?

>> very easy for quite a long time.

>> reporter: who is susceptible to being victimized by this crime?

>> everybody.

>> reporter: victims have ranged from this 1-year-old to a soldier, had a fraudulent return filed in his name, after he was killed in afghanistan. nearly 1 million taxpayers across the country hit in the past year alone. if you had to describe what the last four years have been like for you?

>> hell.

>> sheila vosdoganes had no idea that her information was compromised until her accountant tried to file online.

>> he called said there was a problem, it got kicked out.

>> reporter: what do you mean?

>> something came up that said i had already filed.

>> reporter: had you filed?

>> no.

>> reporter: and that's when her nightmare began.

>> frustrating, scary, aggravating and time consuming. i was constantly on the phone, here at work, at home.

>> reporter: did this almost become a full-time job for you?

>> it was a part-time job for sure.

>> reporter: sheila discovered the burden on her was on her to prove she was the real sheila vosdoganes and deserved her very real $5,700 refund. how long did you wait for the refund?

>> a very long time, and we were dealing with my mother in hospice at the time, so we certainly could have used that money.

>> reporter: how many have you been the victims of tax fraud ? any of you get a letter that you had been compromised? how many of you are police officers ? police officers , all from the town of davie, florida. and somehow they all had fraudulent tax returns filed in their names. how big is your force here?

>> currently we're 170 sworn officers.

>> reporter: how many of those officers have had their identities stolen.

>> going back to 2010 , probably 134 total number.

>> reporter: more than half the force?

>> yes.

>> reporter: detective paul williams said as soon as he heard fellow victims had been victimized, he called the irs .

>> i asked if they could put in a block, they said there was no way, and two days later, tried to file my taxes, and someone had already filed.

>> reporter: you warned the irs , someone might try to do this to me.

>> and that's the most frustrating part.

>> reporter: why?

>> because they didn't do anything to try to stop it.

>> reporter: did you get any information, what address it was sent to?

>> i asked the irs , who it is, where they might be? we don't give that information.

>> reporter: that's been one of the hardest parts for sthis sergeant.

>> if they shared information, we may have arrested people, started investigations, take information with the leads they have, but they are unwilling to share us with. they give us no information and we're law enforcement .

>> reporter: irs code prohibits the agency from disclosing any taxpayer information, even to a victim of fraud. if you would give a grade to the irs , a or f?

>> d or f.

>> f, f, f.

>> absolutely an f.

>> reporter: the irs was given failing marks for terrible customer service for the months or years it can take to fix a problem and for failing to flag multiple refunds, sometimes hundreds, even thousands, going to a single address. but the biggest headline, the irs paid out more than $5 billion in fraudulent refunds in just one year. and until recently, arrests and prosecutions were rare. on a scale of one to ten, what was the risk of a perpetrator being caught?

>> initially? zero risk. the reward far outweighed the risk. they would basically laugh at law enforcement .

>> reporter: this how-too guide confiscated at a jail. step one, get a laptop. two, get social security numbers , birthdays and full names as shown in this undercover police officer on the street, that kind of information can go for as little as $10. they get these social security numbers and names, date of births from where?

>> we've seen medical facilities compromised, insurance companies , facilities that have client based information that is stored.

>> reporter: when they electronically file with the irs , the thieves usually ask for their refund to be direct deposited. all the irs sees is an account number . but many thieves are having the money deposited on a debit card . in all of your years of law enforcement , seen anything like this before?

>> yes. 1985 when i came on, crack cocaine pretty much just hitting the street, and before you knew it, we were inundated with it here, but in this case, they are using debit cards and treasury money & money is the drug. this is nothing more than crack cocaine on a plastic card.

>> reporter: the debit cards are designed for people who don't have bank accounts , issued like green dot , h&r block and net spend. all the thief has to do is swipe and pay. once they get the card in the mail, it's free money , cash.

>> they don't have to show i.d., and they recover the money.

>> reporter: when it hits the card, it's a drop. celebrated in rap videos like this one. and the crooks are dropping some serious cash on luxury items like high-end cars, have a look around the tampa police department 's impound lot. there is a jaguar, custom paint jobs and this mercedes, which police say belonged to rashia wilson , they allege she boasted about her crimes on facebook. i'm rashia, the queen of irs tax fraud . i'm a millionaire for the record so if you think indicting me will be easy, it won't. but her and her boyfriend were among the rare ones indicted. they raked in more than $ 1 million , filing over 220 tax returns , and they flaunted it. police seized this custom made camaro filmed by riding clean magazine. every rim police say paid for at taxpayer's expense. and all while wilson was receiving public assistance. wilson and larry have plead not guilty if convicted, they each could face more than a decade in prison.

>> do you think there was a sense among criminals they weren't really stealing from anyone in particular, just getting free government money?

>> yeah, it wasn't like they came up to you, put a gun in your face and took the money out of your pocket. it was just somebody's name, somebody's social security number and, really, what's the big deal ?

>> reporter: but they are holding up the federal government senior.

>> sure, they are. yeah, they are robbing us blind.

>> this is an incredible story. we'll break here. when we come back, kate snow questions a top irs official about what they are doing to combat this fraud and help the victims we've met, like sheila .

>> reporter: when the irs says they have flags in place now to detect fraud --