Prepaid Tax Returns: Media Outlets Hit and Miss on the Fraud Angle

by Tim Sloane 0

It is rare to see what is primarily the samestory regarding prepaid covered in such diametrically oppositeways. Where Fox19 News delivered a story blaming the entity theyalready knew was guilty, Sheryl Harris of The Plain Dealer actuallydug in and researched the problem and reported the truth!

There are many participants involved in getting tax dollarsdelivered onto a prepaid card and the U.S. Treasury has becomevigilant in trying to prevent fraud given the magnitude of theproblem (approximately $5.2B in fraudulent tax refunds).Suffice it to say that there is now a very convoluted process inplace by Treasury in an attempt to limit these fraud losses.

This was discovered and reported by Sheryl Harris ofThe Plain Dealer:

Ordinarily, a RAC wouldn’t be this bumpy, butyou got sucked into the political tornado swirling around taxrefunds. For starters, tax filing season was delayed this yearbecause of Congress’ fiscal cliff shenanigans.

On top of that, identity theft-related tax fraud has exploded. TheU.S. Treasury Inspector General for Tax Administration estimatesthat identity thieves filed 1.5 million fraudulent tax returns,stealing more than $5 billion. Much of that stolen money wasstashed on prepaid cards, because it’s harder for law enforcementto track.

As a result, the IRS is taking longer to process returns, and, atthe same time, prepaid card issuers are giving a lot more scrutinyto deposits involving tax refunds.

Unfortunately, you moved at tax time, which, unbeknownst to you,triggered a whole bunch of alarm bells.
While there are details still missing, such as how long it takesfor the Treasury to respond to program managers that reportsuspicious returns, Sheryl recognized that there are a large numberof stake holders involved – great reporting!

Then there is Fox19 News, which ran a story using just the obvious factswithout taking the effort to dig into the complexities involved inprocessing these tax returns:

It turns out, NetSpend wasn’t faster for NormaTrammel. Six months later, she’s still waiting for her refund.Company spokesman Rob Ward tells FOX19 that a fraud alert popped-upbecause of confusion over Norma’s address. (Tiffany used heraddress as the mailing address.) So to prevent identity theft,NetSpend put a block on the card.

The Trammels don’t quibble over that. However, they have a problemwith how NetSpend’s customer service dealt with the issue fromthere. They say their situation is similar to the hundreds ofpeople who have complained toConsumerAffairs.com and the BetterBusiness Bureau. Stories they saw after their mom ran intoproblems.

“I read some of the stories and it was the same m.o., the samething,” said Norma’s youngest daughter, Clarissa. “They did thesame thing. They would put a block on the money. And then theywould refuse to release it until you sent all your personalidentification over to them. And then after that, you pretty muchnever heard from them again.”
Of course what Fox19 News missed, and what the Cleveland PlainDealer discovered and reported, is that when 1.5 million fraudulenttax returns are submitted, there are likely to be a large number ofcomplaints, mostly from fraudsters but also from good citizenscaught up in the crimes that clog the government’s wheels.

Thank you Sheryl for giving me faith that there are still excellentjournalists in the world!