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The IRS has a new problem on its hands--scammers filing fraudulent tax returns and stealing refund checks.

"Our cases have increased by about 650 percent since 2008," says Nina Olson, the National Taxpayer Advocate, kind of the internal watchdog at the IRS. People go to her when they have a problem with their returns.

The IRS itself says the number of cases has doubled each year in recent years.

The sickening part is that in many cases, the victims don't even know something is wrong until they try to file their returns.  Todd Macy, a banker in Marin County, only found out something was amiss when he tried to file his return in October after getting an extension.  It turned out someone used his Social Security number in February 2012, but nobody red-flagged it then.  He's still waiting for his refund.  Joyce Hood, a teacher from Bakersfield, noticed her refund was taking a long time to arrive.  It turned out that someone used her husband's name and SSN to file a fraudulent return.  It took her a year to get her refund back.

Tax refund fraud has become a growth industry.  And apparently it's really bad in South Florida.

"It catches on like fire. It spreads like a virus. Friends tell their friends," says Wifredo Ferrer, U.S. Attorney for the Southern District of Florida.

He calls this crime an epidemic. Fraudsters come from all walks of life: hospital workers, former Marines, white collar professionals and former gang members who have switched from street violence to tax fraud.

"I'm seeing from a lot of the local police departments in South Florida that the violence in their communities is being substituted for stolen identity tax refund fraud," he says.

And, the victims are as diverse as the perpetrators: rich, poor, young, old, alive and dead.

And this is just one jurisdiction.  You have to wonder how much it's happening elsewhere.

The IRS is trying to rein in the grifters.

The IRS says it has stopped 5 million attempts to get fraudulent refunds, saving taxpayers $20 billion. And, it says it's using more aggressive screening technology to try to weed out scammers.

"We've at least doubled the number of filters that we have, the filters work very well," says Steve Miller, the IRS acting commissioner. He declined to elaborate for security reasons.

And, the IRS says it took action last month against nearly 400 people suspected of refund tax fraud. Miller says the agency is working on its online security, and better ways to identify the real filer.

One other thing the IRS may want to do--publicize the severe penalties that can be meted out for this kind of crap.
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