Blog | WM. F. Horne & Company, PLLC

15May2014

Physicians, Other Health Care Workers Hit by Refund Fraud

Tax Fraud

If you work in the health industry, don’t be too shocked this year if the IRS sends you or your tax adviser a notice that it is rejecting your tax return because it has already been filed by someone else.

You would be among hundreds of physicians and other health professionals in several states that have recently been affected by a tax-refund fraud. The exact number of victims is unclear, but hundreds of cases have been confirmed in California, Connecticut, Indiana, Maine, Michigan, New Hampshire, North Carolina and other states.

 

“The magnitude of this fraud is shocking and alarming … Physician practices are vital healthcare providers and small businesses, contributing substantially to the welfare of their communities. Attempts to steal these valuable tax refunds not only harm the physicians themselves, but their patients and employees who count on them every day for their physical and economic wellbeing.”

– U.S. Senator Chris Murphy (Conn.)

The IRS and the Secret Service are leading an investigation of this year’s tax-refund identity fraud, with the assistance of the American Medical Association (AMA). Robert Mills, media relations coordinator for the AMA, confirmed that the association is hearing from state medical societies that tax identity theft seems to be a greater problem this year than in the past. But, in a cautionary note, he stressed that this scheme seems to be targeting professionals generally, not just physicians.

Connecticut Senators Richard Blumenthal and Chris Murphy requested a briefing on the investigation from the Director of the Secret Service and the Commissioner of the IRS. To date, approximately 75 physicians in Connecticut have reported that someone filed a fraudulent tax return to the IRS under their names. This problem has affected numerous physicians and health care professionals across the country, and may be a result of a serious security breach, the two senators said.

The victims were among thousands of Americans affected by a surge in refund fraud this year. Thieves steal or purchase Social Security numbers, forge W-2 forms, electronically file fraudulent income tax returns and then collect the refunds– often large amounts. In many cases, the thieves instruct the IRS to send the refund to a bank account that is tied to a prepaid debit card, which the fraudster can then use to withdraw cash at an ATM or spend at retail outlets. According to a 2013 report from the Treasury Inspector General’s office, the IRS issued nearly $4 billion in bogus tax refunds in 2012.

Scott Colby, executive vice president of the New Hampshire Medical Society, said he started hearing from physicians in his state just as they were filing their returns and receiving notices from the IRS that someone had already filed their tax returns and claimed large refunds. So far, Colby has heard from 111 doctors, physician assistants and nurse practitioners in New Hampshire who have been victims of tax fraud this year.

The apparent spike in tax fraud cases against medical professionals is fueling speculation that the crimes may have been prompted by a data breach at some type of national organization that certifies or provides credentials for physicians.
 
Tax fraud is an especially insidious crime as the thieves can create financial accounts in the names of the targets. According to New Hampshire’s Colby, some of the doctors he has spoken with also “have received notification that someone is trying to set up new bank accounts in their names.”  Adding insult to injury, victims of tax fraud one year may also find thieves target them again the next tax season.

The Connecticut State Medical Society (CSMS) has alerted its physicians to visit www.experian.com/fraud and place themselves on a 90-day credit fraud alert. This could potentially slow or halt further attempted identity theft activities. The CSMS says this is just a recommended precaution and that it has no reason to believe every doctor is at risk. If a physician remains concerned, the society recommends he or she go back to the Experian fraud page after 89 days and initiate another 90-day credit fraud alert.

If you fall victim to this scam, you should receive a 5071C letter from the IRS. It will have instructions for providing information via the IRS identity theft website. If this happens, take the following steps:

1. Contact the IRS: This will help you verify your identity and avoid penalties for the fraudulent filing. Call the IRS Identity Protection Specialized Unit at 1-800-908-4490. You will need to file a paper copy of your tax return, along with a completed IRS Form 14039, Identity Theft Affidavit, which should be faxed to the IRS at 1-855-807-5720. Ask your tax adviser if you need an Identity Protection Personal Identification Number (“IP PIN”) for the paper return. The U.S. Secret Service recommends accessing some of the tools and information available on the IRS identity protection information page.  Tax-related identity theft information is also available on the Federal Trade Commission website.

2. Contact the Social Security Administration.
 Call the Social Security Administration’s fraud hotline at 800-772-1213 to report fraudulent use of your Social Security number.

3. File a report with local police. Bring all documentation available, including the state and federal complaints you filed. This will likely be necessary if there is financial account fraud as a result of the identity theft. However, if the only fraud involves tax fraud, a police report will be necessary only if requested by the IRS.

And of course, contact our office for help in this matter. 

  • 15 May, 2014
  • Haley Spain
  • 0 Comments

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