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What is tax identity theft
|Thanks for visiting Spodek Law Group – we’re a second-generation law firm managed by Todd Spodek, with over 40 years of combined experience in federal criminal defense. If you’re researching tax identity theft, you probably already know this: the IRS doesn’t care about excuses. We’ve handled high-profile federal cases – Anna Delvey, the Ghislaine Maxwell juror misconduct case – many of them cases others said were unwinnable.
Tax identity theft is what happens when someone uses another person’s Social Security number to file a fraudulent tax return and pocket the refund. That’s it. Name, SSN, date of birth – that’s all a criminal needs to file electronically, claim a massive refund with fabricated W-2 information, and deposit it into an account you’ll never trace. The IRS processes returns automatically during filing season. By the time anyone notices, the money is gone.
How Tax Identity Theft Actually Works
Criminals don’t need sophisticated hacking skills anymore – data breaches have exposed millions of Social Security numbers, birthdates, addresses. According to the FBI’s Internet Crime Complaint Center, complaints about tax-related identity theft increased 26% in the past year, topping 1,000 reports. That’s just what gets reported.
The scheme is straightforward. Thieves obtain personal information through phishing scams targeting company HR departments – they’ll spoof an executive’s email address, request all employee W-2 forms, and payroll hands it over without questioning. Other times it’s just stolen from the endless data breaches plastered across the news. Equifax. Target. Healthcare companies. Government agencies. Your information is out there.
Once they have your SSN, criminals fabricate income on a fake W-2, file a return electronically claiming a refund, and wait. The IRS has gotten better at catching obvious fraud – but “better” doesn’t mean good. Plenty of fraudulent returns sail through, especially early in filing season before the real taxpayer files. Retirees and people who don’t file annually are prime targets because there’s no legitimate return coming to flag the fraud.
You find out when you try to e-file your actual return and the IRS rejects it. Someone already filed under your name and SSN. If you paper file, you’ll get a notice months later saying the same thing. Then you’re stuck in the IRS victim assistance backlog – which averaged 506 days in fiscal year 2025, down from 676 days in 2024. That’s nearly two years of your life tied up in bureaucracy, proving you didn’t steal your own identity.
Federal Criminal Prosecution – The Penalties Are Brutal
If you’re charged with tax identity theft, you’re looking at multiple federal counts stacked on top of each other. Wire fraud. Mail fraud. Aggravated identity theft under 18 U.S.C. § 1028A – that’s a mandatory two years in federal prison, consecutive to whatever else you’re sentenced for. It doesn’t run concurrent. The judge has no discretion.
Take the Steven Ware case from 2024. Ware, from Yonkers, opened bank accounts using a Connecticut executive’s personal information, then deposited a Treasury check for $810,337. One check. He pleaded guilty to bank fraud and two counts of aggravated identity theft. Sentencing is scheduled for October 2025 – he’s facing that mandatory two-year minimum on each identity theft count, plus whatever the bank fraud adds. You’re looking at serious time, not probation.
In March 2025, a federal grand jury in Louisville indicted Crystal Whitaker – a former paralegal – on 8 counts of wire fraud, 3 counts of tax evasion, and 1 count of aggravated identity theft. The scheme ran from March 2020 to March 2025. Five years of conduct means the sentencing exposure climbs exponentially. According to the U.S. Sentencing Commission, the average sentence for aggravated identity theft convictions was 54 months in 2025 – and 99% of defendants went to prison. Not probation. Not home confinement. Federal prison.
Wire fraud carries up to 20 years. Tax evasion under 26 U.S.C. § 7201 carries up to 5 years and a $100,000 fine. Stack multiple counts together and you’re looking at guidelines that exceed a decade before any cooperation credit.
The DOJ’s Tax Division has made stolen identity refund fraud a priority – they brag about it in press releases. Long sentences. High conviction rates. In one case from 2023, seven defendants were charged with a scheme seeking over $100 million from the IRS using stolen identities. Conspiracy to commit mail and wire fraud, aggravated identity theft, money laundering, access device fraud – every charge the government could think of.
What Makes These Cases Different From Regular Tax Fraud
Tax evasion is underreporting your income. Tax identity theft is stealing someone else’s refund using their SSN – the victim had nothing to do with it. Federal prosecutors love these cases because there’s a clear victim, clear harm, and juries despise identity thieves.
The sentencing factors that matter: how much money was stolen, how many victims, whether you sold the information or just used it yourself, whether you recruited others into the scheme. A single fraudulent return filed out of desperation gets treated differently than an organized ring filing hundreds of returns. But both are federal felonies. Both carry mandatory minimums if charged under § 1028A.
Former prosecutors – we have them on our team – will tell you the government builds these cases carefully. They wait. They watch. They let you file multiple returns across multiple years, gathering evidence for a conspiracy charge that ties everything together and pushes your guidelines through the roof. By the time they arrest you, they have your devices, your bank records, your co-conspirators cooperating against you.
Defendants assume the IRS is too slow to catch them – and they’re right, until they’re not. The IRS Criminal Investigation division doesn’t go after everyone. They cherry-pick cases with strong evidence, significant dollar amounts, or multiple defendants they can flip against each other. If CI is investigating you, they already have enough to indict.
If You’re Charged – What Actually Happens
Most tax identity theft cases start with a knock on your door. Federal agents, search warrant, seizing your computers and phones. Or you get a target letter – you’re under investigation, and the government is inviting you to come in and talk. Do not talk. You will not talk your way out of a federal indictment. You’ll just hand them a recorded confession they play for the jury.
Your first move is finding a federal criminal defense attorney who actually handles these cases – not someone who dabbles in federal court but practices mostly state crimes. Federal sentencing is entirely different. The guidelines calculations, the mandatory minimums, the cooperation process – it requires specific experience. At Spodek Law Group, we handle federal cases nationwide. We know how prosecutors in the Tax Division operate because we’ve worked with them, against them, and sometimes our former prosecutors have sat in their chairs.
Cooperation is often the only way to avoid the mandatory minimums, but cooperation means substantial assistance – providing information the government doesn’t already have, wearing a wire, testifying against co-defendants. It’s not just “I’m sorry” and hoping for leniency. The government files a 5K1.1 motion only if you delivered real value. Without that motion, the judge is bound by the mandatory minimum. Two years minimum for aggravated identity theft, and that’s if you’re charged with one count.
Sentencing also considers criminal history, your role in the offense (organizer vs. minor participant), acceptance of responsibility – that’s a 2-3 level reduction if you plead guilty early and actually accept what you did. Going to trial and losing means you don’t get that reduction, and federal trial conviction rates hover around 90%. Trials are expensive and risky, but sometimes they’re the only option when the government’s case has holes or the evidence was obtained illegally.
Victims Versus Perpetrators – Where the Lines Blur
Not everyone charged with tax identity theft masterminded the scheme. Some people are mules – they opened the bank accounts, cashed the checks, took a percentage, and had no idea how deep the conspiracy ran. The government charges them anyway. Federal conspiracy law means you’re responsible for the entire amount of loss caused by the conspiracy, not just your cut.
Others are genuine victims who got tangled in something they didn’t understand. You let a “friend” use your bank account for a “tax refund” and suddenly you’re charged with conspiracy. The intent element matters – did you know the refund was fraudulent? Can the government prove you knew? That’s where a good defense attorney makes the difference, challenging the evidence, cross-examining cooperators who are testifying to save themselves, negotiating with prosecutors to reduce charges or secure a cooperation agreement before indictment.
Some defendants genuinely didn’t know. Others knew exactly what they were doing and got greedy. Federal judges can tell the difference – they’ve seen every excuse, every sob story, every “I didn’t know” defense. What moves judges is accepting responsibility when it’s true, showing remorse that’s genuine (not performed), and demonstrating you’re not going to reoffend.
At Spodek Law Group – we’re not interested in taking every case that walks through the door. We take cases where we can actually make a difference. If the evidence is overwhelming and cooperation isn’t an option, we’re honest about that. If there’s a viable defense or a path to a better outcome through negotiation, we fight for it. Federal sentencing isn’t about miracles – it’s about understanding the guidelines, knowing the prosecutors, and positioning your case for the best possible result under the circumstances.
Tax identity theft prosecutions are increasing. The IRS and DOJ have made it a priority, the technology has made it easier to track, and juries have zero sympathy for defendants. If you’re under investigation or already charged, time matters. Evidence gets preserved or destroyed. Witnesses disappear or start cooperating. The earlier you have experienced counsel involved, the more options you have. This isn’t a state court case where you can plead to a misdemeanor and walk away – federal charges mean federal prison unless you have a strategy.