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I-Team: Stolen Tax Refunds On The Rise In Mass.

BOSTON (CBS) - It's the time of year when many of us start thinking about how we will spend our tax refunds. The problem, however, is the number of stolen refunds is soaring.

The I-Team has learned Massachusetts is one of the areas of greatest concern. We've been told gangs based in the Lawrence area with links to the Dominican Republic are very active in this area.

A couple of years ago, Kevin Johns was anticipating an $8,000 refund from the federal government. When it didn't arrive, he had to borrow money from a family member to cover some expenses.

A crook had stolen his personal information and filed a return in his name before he did, so that's where the Internal Revenue Service sent the check.

The same thing happened to Chris Howard. The IRS told him a return with his financial information had already been filed, and the check had already been mailed.

Michael Cohn of www.accountingtoday.com says billions of dollars are being lost to this type of fraud. In fact, the IRS saw a 40% jump in the number of fraudulent attempts just last year.

"They don't need contact with the crime victim, and IRS is under a lot of pressure to get the refunds out quickly, so that they are not able to control as much as they would like where the money is going."

The IRS is trying to fight back. They've doubled the number of staff working on these cases. They've also upgraded fraud detecting software filters because many of these cases are e-filed.

Cohn added, "They've also been coordinating with the Justice Department, and with police departments to some extent, and they have been doing wide sweeps and cracking down on tax preparers when they see these problems happening."

The stakes are high. A report by the US Treasury estimated the potential loss to the government at $21 billion over the next five years.

Kevin Johns hopes they fix the situation soon, because he's now been a victim twice. "The next year I file my taxes and the same thing happens again. I filed with the accountant and he says uh-oh, we've got a problem, it came back rejected, and I said oh no not again."

Johns worries the IRS isn't doing enough to protect filers properly.

Some tax advisers have warned refunds could be slower this year because of the increased safety measures being put in place.

The best defense against becoming a fraud victim is to file as early as possible, and use a reputable preparer.

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