Identity Thieves Target Tax Refunds

April 4, 2011 -- Tax day is less than two weeks away, and this year, for the first time ever, the Federal Trade Commission says tax refunds are the No. 1 target of identity thieves.

Tracey Cochran was anxiously anticipating this year's tax refund, because money was tight.

"I had been unemployed and just started temp work," Cochran told ABC News.

She expected to receive a $2,400 check from the Internal Revenue Service. Instead she received a notice that something was wrong. Somebody else had filed a return in her name, and a thief was trying to intercept her refund.

"I went into a panic, an absolute panic," Cochran said.

Isaac Wolf of Scripps Howard News Service wanted to know if there were more cases like Cochran's. "I found something astonishing," he said. After analyzing more than 1.4 million identity theft complaints, he learned that tax identity theft has more than tripled in the past five years. "Essentially what happens is that someone takes your name and your social security number and they lie to the IRS. They fill out a tax return, and they submit it to the IRS, and frequently they're getting your tax refund check back. It's as simple as that."

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The FTC said complaints fall into three main categories:

1. Fake Tax Prep Services

Thieves offer to do other people's taxes for free. They then file fraudulent returns with Uncle Sam, and hijack the refunds for themselves.

2. Employment Fraud

A crook gets a real job, but gives a stolen Social Security number. The crime is revealed when the person with that Social Security number gets a notice saying they failed to declare income.

3. Stealing Dependents

In this scenario, crooks snag a child's Social Security number, then lie on their returns by claiming the child as their own -- all to try to score a larger refund.

"From the criminal's perspective, a little bit of money from a great number of people starts to add up," said Steven Toporoff, an attorney at the FTC.

Greg Sartin's daughter, Taylor, had her identity stolen when she was just a baby and he fears for her financial future once she's an adult.

"When she turns 18, is she going to have items on her credit reports that are going to make it difficult for her?" Sartin asked.

When Sartin tries to list his own daughter as a dependent, his return is rejected. He says Taylor has been used as a dependent on other people's tax returns six times.