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Hey, Gimme Back My Refund!
A pricey new system hopes to stop impersonators from stealing millions in tax refunds.

This tax season, the Wisconsin Department of Revenue hopes to prevent $10 million a year in tax fraud with a system that costs taxpayers $2 million – and questions them as to their true identity.

Residents who either file online or through the mail may be subjected to a four-question quiz confirming that they are who they say they are. What those questions will ask, officials aren’t saying, but they insist that if you’re you, and not a scammer relying on fragments of personal information and forged W-2s, you’ll know the answers.

The IRS has been sounding the alarm as of late on this brand of fraud in which thieves file tax returns in someone else’s name. The agency estimates it paid out $5.2 billion in such refunds for tax year 2010 and $3.6 billion in 2011. Thieves gather personal information on taxpayers from a myriad of sources, including documents left in dumpsters, responses to spam emails and “phishing” attacks in which the scammer impersonates a trustworthy entity, such as a bank. Comparable figures for Wisconsin aren’t available, but Laurel Patrick, DOR communications director, notes that the department presumes “national statistics, as presented in studies completed by the IRS, are representative of what we would find in Wisconsin.”

The computer system Wisconsin is paying $2 million to acquire will attempt to flag returns that could be the work of identity thieves, and those filers would then have 20 days to complete one of the identity-confirming quizzes. If they fail twice, they’ll have to mail in additional documents – assuming the returns weren’t fraudulent.

“Information technology is a mixed blessing,” says Revenue Secretary Richard Chandler. “We know fraud is taking place, and it is an issue.”

This article appears in the April 2014 issue of Milwaukee Magazine.
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