Tucson physicians wary after tax identity theft

The Theodorous are among at least 20 local physicians who were targets of tax identity theft in 2014.

Though they usually file close to the April 15 deadline, filing early is one of the strategies the Theodorous are taking to protect themselves this time around.

“It’s emotionally stressful. My wife and I file jointly and somehow they knew that and had all the information for the two of us. It was a little spooky,” said Andreas Theodorou, who is chief medical officer at the University of Arizona Medical Center. His wife is a local pediatrician.

“Then I started hearing about more colleagues in the same position, several here and across the country. To this day no one has figured out, that I’m aware of, where this fraud came from.”

National scam

Numerous physicians around the country were victimized last year, but the issue is not solely a problem for doctors. Tax identity fraud is a major problem nationwide, where criminals are getting the names and Social Security numbers of taxpayers from a variety of professions and income levels, filing in their name, and getting refunds sent to themselves.

“It is a big deal in the U.S., a big problem,” IRS special agent Brian Watson said.

And it’s not an issue in which IRS computers are being hacked, according to Watson.

The criminals find the information they need a number of ways — Dumpster diving, hacking personal computers, and breaking into offices to steal databases, among other things, he said.

“A lot of this is being done, sometimes by inmates in jails,” said Patrick Burns, co-director of the Washington, D.C.-based Taxpayers Against Fraud Education Fund. “They have the refund sent to a third party who is not in jail.”

Burns said it’s less common for professionals like doctors to be targeted. More often the victims are people who are young, low-wage earners, he said.

According to IRS data, 748 people were sentenced following tax identity theft investigations in the most recent fiscal year. Most of those people were incarcerated and the average time to serve in prison is 43 months. The number of investigations and sentences has gone up since 2012. That year, 223 people were sentenced for tax identity theft, federal data show.

Those most recently sentenced include a medical records clerk in Alabama, a former postal employee in Florida, a tax return preparer in Louisiana and in California, a man formerly licensed as a California tax attorney and certified public accountant.

Local tax crimes

Recent cases in Arizona include April Escobedo and her daughters Rachel and Cassandra Grijalva, who in October were indicted by a grand jury in Tucson on conspiracy to defraud the U.S. government. The indictment accuses Escobedo of filing 24 false claims with the IRS, using names, Social Security numbers and a fake income. The trio collected a total of $107,000 between 2010 and 2013, the indictment contends.

The federal government alleges that Escobedo and her daughters told a group of individuals that they would give them money in exchange for their names and Social Security numbers.

Also in October, a federal judge in Tucson ordered 36-year-old Osabuohien Odyssey Oronsaye to pay nearly $50,000 in restitution and spend 364 days in prison for preparing tax returns with the names and Social Security numbers of people whose personal information had been stolen.

Oronsaye was also accused of making up income and wage information, tax withholding information, tax deductions, tax credits and dependents. The investigation began when Cochise College officials contacted Sierra Vista police about a flash drive found in a college computer. The storage device contained about 900 names and personal information.

In 2013, 37-year-old Rio Rico tax preparer Imelda Arrendondo and her tax preparation assistant, 35-year-old Yadira Moreno of Nogales, were sentenced to prison for conspiring to defraud the U.S. by filing false federal income tax returns.

Arredondo used her clients’ tax returns to file and receive inflated tax refunds by falsely inflating her clients’ wages, adding false dependents, and using false filing status, all without her clients’ knowledge or permission, the Arizona U.S. Attorney’s Office said. The pair was ordered to pay a combined restitution of nearly $305,000.

Setting the record straight

The Theodorous went to file their taxes shortly before last year’s April 15 tax deadline only to receive a note back from the Internal Revenue Service saying their taxes had already been filed and a refund had been issued. In order to clear up the problem they had to file an IRS 14039 Identity Theft Affidavit to describe what happened. They ended up receiving their refund in mid-summer, Theodorou said.

Radovan Pletka and his wife, former UA Medical Center psychiatrist Dr. Christine Pletkova, were also victims. They discovered the problem after filing a joint return for an extension deadline in October, and say the experience continues to be stressful.

“My wife got the letter from the IRS in December saying that she needed to send additional documents. They told her they already had a tax return in her name,” Pletka said. “The person had already received a refund. We are still owed $10,000 to $11,000. It’s the first time anything like this has ever happened to us.”

UA Health Network officials sent out a letter last April warning physicians of the fraud, but Pletka said his wife didn’t see it. The letter, sent by UA Health Network vice president and chief human resources officer John A. Marques, says physicians in Maine, New Hampshire, Indiana, South Dakota, Iowa, North Carolina, Pennsylvania and Massachusetts were also reportedly victimized, as well as some doctors from the local Carondelet Health Network, though Carondelet officials said they have no knowledge that any of their doctors were affected.

Security breaches investigated

While Pletka wondered whether the problem began within the UA Health Network, officials say they conducted a review of their access points, logs and processes and could not find any evidence that any security breaches of physician personal information occurred within either the network or the UA.

“It looks like it was a national database that the criminals got,” UA Health Network spokeswoman Katie Riley wrote in an email.

She said there are no reports of the scam victimizing doctors so far this tax season.

There are ways to protect oneself against tax-related identity theft. In addition to filing early, the Theodorous have identity theft protection software, and they received a PIN number from the IRS for use when filing their federal tax return.

The IRS assigns a unique six-digit PIN to victims with resolved cases of identity theft. The Theodorous also have checked their credit reports but the fraud appeared to have affected only their tax returns.

Self-monitoring

Writing in a blog for the publication Physicians Practice, lawyer Ike Devji in May wrote about tax-related identity theft targeting doctors from the Arizona Medical Association and the Maricopa County Medical Association.

“The threat is national in scope and all doctors need to be aware of this information and take basic, preventative and defensive measures,” he wrote.

Devji wrote that physicians are being encouraged to go to www.experian.com/fraud to place themselves on a 90-day credit fraud alert.

IRS officials say that in 2015 they will continue to increase the agency’s use of identity theft data models and filters, which stop the vast majority of fraudulent returns.

“People all over the country are getting sentenced to prison. These people are going to jail,” IRS special agent Watson said.

But Burns of the Taxpayers Against Fraud Education fund says it is getting increasingly challenging for the IRS to catch fraud perpetrators because Congress has cut $1 billion of the agency’s budget over the last two years.

“They are cut to the bone. They are not going to be able to catch fraudsters the way they used to,” Burns said.

“If you are not patrolling your own tax return, don’t think the IRS will be doing the job. The best thing that can happen is for people to do their taxes on time because the fraudsters are doing it right now.”