A little-known but widely used federal database meant to protect Americans from fraud has itself become a major source of fraudulent tax refunds. Thieves simply take the Social Security number and other personal information of a deceased person, or most often recently deceased children, which can be found in the widely public and freely accessible, Social Security Administration’s Death Master File. This data is then used to falsely claim the deceased as dependents in order for thieves to receive the refund. The Internal Revenue Service estimates that this damaging loophole has enabled tax filers to improperly submit 350,000 returns on dead Americans, approximately $1.25 billion in refunds during this tax season alone. Not only has the Death Master File become a major source of tax fraud, but a recent investigation by Scripps Howard noted that it accidentally lists about 14,000 living Americans each year in the death database. The Social Security Administration says it is powerless to act due to restrictions set forth by the Freedom of Information Act, which requires information contained in the Death Master File to be publicly released. “While we believe that wider notification (to people at risk) is a piece of that protection, we also believe that narrowing the range of information included in the public release, delaying the public release to allow for corrections, and similar actions are at least as important,” said Assistant Inspector General Jonathan Lasher.
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