A 13 Watchdog team investigation found how difficult it is for state investigators to find people responsible for committing tax fraud using identity theft.
The issue was brought to our attention by a local woman who is a former police officer. She had state income taxes filed on her social security number and mailing address.
Wendy Evanov, who used to work as a Grandville Police detective, says she received a mysterious check in the mail for $933 for filing her state income taxes. She later learned her personal information had been compromised and the check somehow ended up in her possession instead of going to the people who had filed her taxes illegally.
“I have some evidence you don’t normally get,” Evanov said. “It’s extremely rare to have the actual check.”
Evanov also worked at the John Ball Zoo and we confirmed from the zoo up to 10 employees there were victimized by identity theft.
Through the process, Evanov voided the check to protect herself and shopped her case around to an investigative agency to find somebody to help her locate the people who stole her identification.
“It went really nowhere,” she said.
Evanov contacted the 13 Watchdog Team to take a look at it. She told us she put a freeze on her credit and is on high alert for anything suspicious.
“I know (these cases) are cumbersome, horrifying cases and they might be in some other country and some other state but if we don’t try we’re never going to make any headway,” Evanov said.
We headed to Lansing to get information to start building our case against the thieves who did this to Wendy and so many other victims. We got quite a surprise when we immediately hit a dead end.
We learned from state investigators if the Michigan Department of Treasury doesn’t stop the fraud as it comes in, it’s almost certain the perpetrators will never be caught.
Taxpayers, including Evanov, seem to be on the losing end.
“It’s a difficult type of fraud to get the bad guy because of the nature of electronic tax filings,” Michigan Deputy Treasurer Glenn White said. “Individual cases may not be as actionable as some other crimes.”
Despite hitting a roadblock, our investigative team was provided information few have been provided about the inner workings of the state’s plan to stop people from using somebody’s else’s identification to get income tax refunds.
In most cases, investigators only see the bad guys via their Internet Protocol Address or IP address. That number often doesn’t lead to the individual that committed the crime because the IP addresses can be opened and closed in a matter of minutes. The bad guy can use IP addresses around the world, jumping from place to place digitally. Investigators call the people who do this “ghosts”.
“It’s because of the intensity it takes to track something like this down for what could be a relatively small dollar amount,” White said. “It’s hard to (gather) the resources to go after just one of these so that’s why our focus is stopping it from occurring.”
Add in the cost of prosecution and being able to prove the crime happened, and the state’s Department of Treasury is clearly on the defensive.
But there is some good news. The state’s Treasury has had some success in the current filing season identifying fraudulent tax returns as they come in. At least 4,000 returns were successfully pulled out saving taxpayers $16 million dollars in bad refunds and it’s likely they saved more than that. In prior years, it’s estimated the state’s been able to block more than $100 million in bad returns.
“I will admit we’re not perfect so we’re not getting every penny of it but we’re doing a pretty good job of stopping it,” White said.
White says the state works with the IRS and with tax preparers to try to plug the gap. He says the Treasury looks at every refund request that comes in and each one goes through a risk assessment. That assessment is stricter now than in previous years slowing the tax refund processing system down by a day or two.
White says the slight delay is worth it to try to protect taxpayers.
“It’s a tough crime to prosecute,” White said.
The Michigan Attorney General’s office is also fighting identity theft. Our investigative team attended one of Attorney General Bill Schuette’s forums to help inform people about identity theft. Schuette’s group does more than 60 events per month.
“It’s one of the fastest growing identity theft areas is the tax area,” Michigan Assistant Attorney General Katharyn Barron said.
But what about getting the bad guys and making them pay?
“One of the things you can do is get your information together as quickly as possible and beat them to the punch, file as quickly as you can,” Barron said. “An ounce of prevention is worth a pound of cure.”
As for Evanov’s case, it turns out the former detective’s quick work informing the state about her identity theft prevented the bad guys from getting the money this time around. The $933.15 was returned to taxpayers and not to the thief.
“We would like to thank Ms. Evanov for her diligence in recognizing there was a problem and notifying us right away,” Department of Treasury spokeswoman Danelle Gittus wrote. “Her quick thinking and response helped us to recover the funds the fraudulent claimers were trying to collect.”
“At least I think we put these bad guys on their back foot,” Evanov said. “They felt a little of your breath on the back of their neck.”