It’s easy for criminals to e-file using a real name and Social Security number combined with a phony Form W-2 (wages) or fabricated Schedule C (business income). The refund can be posted to an anonymous “Green Dot” prepaid Visa or MasterCard MA +0.20% purchased at a drugstore. Such cards have a routing and account number suitable for direct deposit. The IRS may even correct a fraudulent return to refund the estimated taxes that the real taxpayer already remitted, as happened to one of my victimized clients.

Another form of fraud is when an unscrupulous return preparer modifies the bank-routing information on a return so the direct-deposit refund will wind up in his own bank account. He might increase the deductions so a return will show a larger refund due, with only the increase routed to his bank account. The victim will know nothing unless the IRS sends an audit notice.

Other preparers have abused the return information of former clients to file false refund returns in subsequent years. Criminals have established physical offices and websites displaying names of major tax-preparation franchises in order to gain genuine return documents and signatures from unsuspecting victims.