Identity Theft Claims $4 Billion in Tax Refunds

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Identity thieves have stolen billions of dollars in fake federal tax refunds from the American people.

The newest trick involves getting refunds loaded onto prepaid debit cards instead of opting to receive them by check. The process helps criminals evade detection.

Thieves have stolen billions of dollars from schoolchildren in Florida, prisoners in Pennsylvania, teachers in Washington state, and soldiers deployed in Iraq and Afghanistan.

Laura Hankins, from West Milwaukee, Wis., received a rejection letter mere hours after she filed her daughter's tax return. A return had already been issued to an identity thief using the 19-year-old's personal information

"This is the first time in her life she has ever filed income taxes, after earning all of $1,800 stocking products on grocery store shelves," Hankins said.

Hankins and her daughter spent 20 hours filling out paperwork just to prove the 19-year-old's legitimate identity.

"Some kids get to go to Florida for spring break, but she got to go to the West Milwaukee police station to file a theft report," Hankins said.

In 2012, the Internal Revenue Service issued almost $4 billion to people using stolen identities. IRS officials said the agency is strengthening controls designed to detect fraud to help curb the problem.

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