If our practice is any indication, tax refund fraud from identity theft likely skyrocketed so far in 2014. Last year the IRS reported around $4 billion in suspected refund fraud. I suspect that number could triple. Last year we had less than a handful of returns rejected because the social security number was previously used to file a return for the year. I am not talking about dependent being claimed by the other parent or spouse who didn’t change the name type rejects, I am talking about the ‘someone stole and used the number to file a return’ type problem.

Starting about two weeks ago this season, we received reject notices caused by identity theft. We quickly noticed a pattern, nearly all rejected returns were for physicians. These are high earning taxpayers with plenty of withholding, and the potential for large refunds would not be highly unusual. We suspect that a physician database was hacked somewhere, perhaps a hospital or credentialing entity. Contacts at other local firms indicated that they were experiencing the same conditions.

We reached out to our national association and received similar reports, indicating this is not a localized problem. One firm noted that is was so bad in their area that a local hospital put out a warning to all its physicians. If nationwide, this would be a serious, organized scheme that likely took in billions. Medicare hacked?

I hope the FBI or IRS criminal investigation division is able to track down and make arrests quickly.