The Internal Revenue Service has agreed to change its policy on identity theft and provide victims with copies of the fraudulent tax returns that have been filed under their names by scammers.

A massive case of organized tax and bank fraud culminated September 27, 2013 with the unsealing of four federal grand jury indictments accusing 55 people of participating in one or more illicit schemes, including the theft of more than 2,000 identities that were used to claim more than 420 million in bogus IRS tax refunds. As a result the IRS paid out more than $7 million, even issuing payments in the names of dead people.

A few weeks ago in (TTW #154) we first talked about identity theft and the growing tax fraud problem. This week we want to share with you a statement from the IRS’s Chief Legal Counsel on this issue that appeared in the Journal of Accountancy.

There is a lot of discussion about the growing problem of identity theft. Most people think of identity theft as a stolen credit card or a compromised bank account. But many people don’t realize that tax identity theft is becoming increasingly common. The IRS reported tax identity theft as No. 1 on its annual list of “Dirty Dozen Tax Scams.” In fact, many refunds in the 2012 filing season were delayed because of IRS filters that were meant to screen for identity theft on tax filings. When the IRS cannot detect and prevent tax identity theft, it becomes a complex post-filing issue.