VIRGINIA BEACH - Stephanie Saunders is still jumping through hoops five years after someone fraudulently filed taxes under her name. Just four months after getting married in 2008, she tried to file under her new name. Imagine her surprise when the IRS gave her some bad news.
"The IRS says 'We already paid you.' I said 'Really?' They said, "Well, we paid you $3,500,'" says Saunders.
Turns out someone in Texas used her Social Security number to file a return.
"To have $3,500 stolen from us that year was horrendous."
Since that time, Stephanie rushes to file her return before the thief beats her to it.
Cyber Security expert Heather Engel says the IRS gives out billions of dollars in fraudulent refunds every year -- $5.2 billion in 2010 alone. She recommends filing your return as soon as you get your W2.
"If you wait until April 15 to file your taxes, you may find yourself out of your tax return. There's really not much you can do," warns Engel.
Jackson Hewitt franchisee Troy Robertson says his tax preparers see it all the time - customers stunned by the discovery that a return has already been filed.
"Everybody's like, 'What are you talking about? You've got to be kidding? Someone has filed my tax return?' And you have to be the one to say yes," says Robertson.
In recent years, the IRS has come under heavy criticism for not doing enough to stop this type of fraud. The Treasury Department's Inspector General report in 2012 found hundreds of false returns being filed under the same address or numerous direct deposits into one account. Those are clear signs of fraud that weren't flagged.
IRS spokesperson Mark Hanson says the concern is not falling on deaf ears. The government knows fraud is a serious problem.
"We're taking steps to try to resolve it, not only to bring the perpetrators to justice but also to try and protect innocent taxpayers who are being victimized," he said.
It took Saunders about ten months to clear her name. She had to send the IRS lots of documentation to prove her identity, including her birth certificate and several years of W2s. The IRS has given her an Identity Protection PIN number. It's a six digit code she must use when she files her taxes to prove that it's her. 1.2 million taxpayers have one.
How can you help protect your identify from being stolen and used to file a tax return? Hanson recommends never carrying your Social Security card or any document with your SS# on it in your wallet and safeguard important documents.
The IRS also recommends not giving any business your SSN just because they ask. Give it only when required, check your credit report every 12 months, keep your computer security up to date and never give personal information to any person or business you don't know.
Hanson says clearing your name with the IRS can take 180 days.
The IRS has an online guide to ID theft that includes what to do if your tax records were affected by identity theft.