Tax season is enough of a hassle with all the paperwork -- now imagine someone stole your identity and used it to cash in a fake tax return.
With the annual federal tax-filing season under way, the IRS has its eye on three Bay Areas metropolitan hubs, working to block fraudulent claims before they're processed. The country's top tax law enforcer this week named Oakland, San Francisco and San Jose among the 17 highest-risk places for identity theft and refund fraud.
The Bay Area isn't the only region struggling with tax fraud; experts agree that the global reaches of the Internet, the frequency of online transactions and the surge in personal information appearing online has helped trigger an increase in identity theft everywhere.
"We know from the IRS that's its becoming a much bigger and bigger problem for them," said Caroline Chen, assistant clinical professor of law and director of the Low-Income Taxpayer Clinic at Santa Clara University. "And they're trying to take a really hard line with it."
But the three Bay Area cities do stand out. Their urban, densely populated cores and international flavor make them ripe for fraud, experts say.
"There tends to be an underground economy of white-collar crime with those sorts of conditions," said David Gamage, assistant professor of law at UC Berkeley.
Other factors such as heavy social media use and Silicon Valley's young, tech-savvy demographic that is comfortable experimenting and sharing information on the Internet may also contribute to the Bay Area's higher rate of fraud, they say. People post their birth date and address on Facebook, and will volunteer private information to the blogosphere that would give any attentive fraudster an open invitation, they add.
"People are putting all kinds of nutty, crazy information about themselves out there," said Thomas Bennett, a planner at New England Financial and a member of the board of directors at the Financial Planning Association of the East Bay. "You're just making it easy."
And just like New York and Miami -- other cities the IRS named risky -- the Bay Area culture is fast-paced and craves efficiency. People may skim over the details on a credit card statement or not look at it for months, or decide not to take the time to order their yearly credit report, all of which can help detect fraud, security experts say.
"They don't look at the details," Bennett said. "It's a very busy society."
Tax-related identity theft strains cash-strapped government agencies and can reward successful criminals with a fat, undeserving payday, the IRS said. Arlette Lee of the IRS Criminal Investigations for Northern California said perpetrators can be individuals working alone or in fraud rings scheming to steal as many identities as they can.
According to an IRS press release, a Dublin woman, Denise LaShawn Reed, was arrested Monday on 14 counts of false tax refund claims totaling $97,002. She had at least five different identities and is facing up to five years in prison, the IRS said.
Other Bay Area cases since mid-2012 show conspiracy rings in which a handful of people from Pittsburg to Antioch and Oakley were working in concert to defraud the IRS of hundreds of thousands of dollars in refunds.
"I don't know if they're teaching each other or what," Lee said.
Recent convictions in the Bay Area have included prison sentences ranging from one to 10 years, although IRS Acting Commissioner Steven Miller said Thursday that sentences may extend up to 20 years.
"We want to be clear that there is a heavy price to pay for committing refund fraud and identity theft," Miller said, and "people are going to jail for a long time as a result."
Identity theft hits all levels of income and education, and all races and ethnicity. Chen, of SCU, recently helped an elderly Bay Area man who has been living on Social Security disability without an income since 2008. He only just discovered his identity had been stolen -- he doesn't know when -- and the thief received a $4,000 tax return in his name.
The IRS has plunged more resources into enforcement, pulling employees from other areas of the agency to help with the crackdown and scaling up the staff hours dedicated to identity theft and tax fraud. But the agency is underfunded -- and likely to get cut again -- and local law enforcement usually can't react fast enough to these types of crimes, Gamage said.
But Gamage said that while people need to be careful -- don't get credit card statements in the mail and change your passwords for online banking -- there's no reason for panic. Credit cards and banks are quick to reverse fraudulent charges, and the IRS has systems in place to help victims of identity theft.
"Sure, it ends up being a hassle," he said. "Beyond that, this is just a risk of the technology age."
Contact Heather Somerville at 925-977-8418. Follow her at Twitter.com/heathersomervil.
The IRS has named the following 17 cities as high-risk for identity theft and tax refund fraud:
El Paso, Texas
Source: Internal Revenue Service
Tips to protect your identity
Don't carry your Social Security card or any documents with your SSN on it. Don't write your Social Security number on your checks.
Secure personal information in your home and protect your personal computers by using firewalls and anti-spam/virus software.
Don't give personal information over the phone, through the mail or email unless you have initiated the contact or you are sure you know who you are dealing with.
Remove your name from the marketing lists of the three credit reporting bureaus. Call 1-888-5OPTOUT or go to www.optoutprescreen.com.
Create tough passwords, use different passwords for each account and change them often.
Shred mail and other documents with personal information rather than tossing them in the trash.
Request a free copy of your credit report annually. Visit www.AnnualCreditReport.com or call 1-877-322-8228.
When someone dies, provide a copy of the death certificate to all three credit bureaus, Equifax, Trans Union, Experian. Also, let the Social Security Administration know.
If you become the victim of identity theft or believe you may be at risk, call the IRS Identity Protection Specialized Unit, toll-free at 1-800-908-4490.
If you receive a notice of audit from IRS and believe someone may have used your SSN fraudulently, notify the IRS immediately by responding to the name and number printed on the notice. You will need to fill out the IRS Identity Theft Affidavit. More at www.irs.gov/uac/Identity-Protection.
Sources: IRS, Financial Planning Association of the East Bay, New England Financial, Ballou Plum Wealth Advisors