Taxes After Death: Tax Fraud Using Old Social Security Numbers

June 26, 2015 | By: Matt Robinson

social security fraud and taxesWhen we think of tax fraud, often our minds jump to activities like under-reporting income and overstating deductions and credits. Sometimes, we also consider fraudulent actions like identity theft. Many scam artists use others’ Social Security numbers to claim their refunds. However, another form of tax fraud is a concern to the IRS: It appears that people use old Social Security numbers to file taxes — and claim refunds.

Social Security Numbers from Before 1901

According to the Social Security Administration, the first Social Security number was issued sometime in 1936. Today, we think of Social Security numbers as
being issued to infants. However, when Social Security numbers were first issued, adults had to receive them. As a result, many of the numbers were issued to people who born decades before the 1930s.

For some of these Social Security number registrants, there isn’t a record of death in the system. According to NBC News, there are close to 6.5 million Social Security numbers for people born before June 16, 1901 that don’t have death dates on record. That provides fraudsters a chance to use an old Social Security number to file their taxes.

According to the NBC News story, almost 67,000 people filed using these old Social Security numbers between 2006 and 2011. As you can tell, someone born before June 16, 1901 is at least 113 years old. When you consider that there are only 39 people alive in the world right now that are known to be at least 112, the number of tax filings using these numbers
is excessive.

Part of the reason that this type of fraud can go forward has to do with the fact that so much of the process is handled electronically right now. With millions of tax returns going through the IRS each year, it’s impossible for each return to be reviewed by a human who might be able to tell that there is problem. As it is, there are no death dates for these particular Social Security numbers recorded in the system, so there is nothing to alert a computer to the fact that a filer is probably, in reality, dead. The tax returns flow through the system, the numbers are crunched, and that the appropriate tax returns issued.

While all of this is fraud, not everyone filing these tax returns hasn’t paid into the system. In some cases, the Social Security numbers of the deceased are appropriated by illegal workers and used on paperwork that gets them their jobs. In these cases, there is money being paid into the system, and payroll taxes are being paid. Government benefits aren’t often paid to these number holders, either, because the earnings reports don’t usually match the name of the original number holder. However, it’s still fraud, and agencies are trying to figure out the best way to
move forward with enforcement.

There are some recommendations to fix this problem, but it remains tricky, since data needs to be found, and there are worries that some inaccurate data might be transferred. It’s an interesting situation that is on the list of things that the SSA is trying to figure out.