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Regulation and Compliance > Federal Regulation > IRS

Identity Fraud and Theft Increased Ahead of Tax Season: Report

By Michael S. Fischer

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What You Need to Know

  • Fraudulent creation of new credit and loan accounts rose 61% from 2020 to 2021, Allstate Identity Protection found.
  • By year-end, this type of fraud accounted for more than half of the firm's identity theft cases.
  • While reports of unemployment and tax fraud continue to decline, both are expected to rise again, AIP's Bertolucci says.

You can’t keep a good identity thief down. The best ones will always come back with a new scheme to defraud vulnerable and unaware Americans, resulting in billions of dollars in losses.

Consider that between October and December, Allstate Identity Protection recorded an 11% increase in identity theft and fraud cases, the firm reported Thursday. The increase was led by rapid spikes in instances of fraudulent credit or loan account creation, inquiries and applications. 

“In today’s digitally connected world, cyber fraud and identity theft have become the ultimate crimes of opportunity: as quickly as vulnerabilities are detected and protected against, new ones emerge,” Emily Snell, president of Allstate Identity Protection, said in a statement. 

“Yet, few resources exist to help Americans, experts and the news media understand digital fraud and the latest attacks.”

To address this issue, Allstate Identity Protection has launched Identity Fraud in Focus, a quarterly report designed to expose the latest lines of attack identity thieves are using. 

The fourth-quarter report found that fraudulent creation of new credit and loan accounts grew by 61% from 2020 to 2021. By year-end, this type of fraud accounted for more than half of the firm’s identity theft cases. 

Another 42% of cases from October to December 2021 were instances of credit and loan applications. 

“Stories from our members are a constant reminder that identity theft and fraud come in all shapes and sizes,” Lewis Bertolucci, AIP’s vice president of product, said in the statement. 

Take disability fraud. After defrauding government agencies that handle unemployment fraud, scammers may be turning to the state-level agencies that oversee disability benefits, AIP said. 

Between November and December, the firm saw open cases involving false disability insurance claims in California double compared with previous months. 

In these cases, victims may receive a letter related to disability benefits for which they did not apply, or an employer may notify victims that someone has filed for disability in their name. 

Unemployment Fraud Abates

AIP noted that reports of unemployment and tax fraud on the decline continue to come in, constituting just 1% and 0.6% of total remediation efforts between Oct. 1 and Dec. 31. At one point, unemployment fraud, fueled by the pandemic, accounted for nearly three-quarters of AIP remediation cases. 

By resolving these unemployment fraud cases, AIP said, it helped members save nearly $17 million in taxes they would have owed for last quarter. 

“Though steep drop-offs in unemployment and tax fraud are encouraging, we expect to see both on the rise again this tax season, as many victims of these types of fraud do not realize they have been targeted until they file taxes,” Bertolucci said.

Michael S. Fischer

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