Social Security Fraud: What Is It Costing Taxpayers?

Investing News

Social Security fraud statistics can be difficult to pin down. Some are grouped inside a larger category that the Social Security Administration (SSA) calls “improper payments,” which includes everything from innocent mistakes to willful fraud. The SSA estimates that it made about $7.9 billion worth of improper payments during the 2019 fiscal year.

Social Security-related fraud can also take other forms, such as identity theft using stolen Social Security numbers and scams involving bogus phone calls and emails purporting to be from the SSA. Collectively, these frauds cost the U.S. government and individual taxpayers millions, if not billions, of dollars every year.

Key Takeaways

  • Social Security fraud costs Americans millions, and possibly billions, of dollars each year.
  • Fraudulent activities include collecting retirement or disability benefits that the person is not entitled to.
  • Stolen Social Security numbers are used in numerous frauds involving identity theft, including the filing of false income tax returns to collect fraudulent refunds.

What Is Social Security Fraud?

Though best known for its monthly payments to retirees, the SSA is also responsible for a number of other programs, including survivor benefits for widows, widowers, and dependents of eligible workers; Social Security Disability Insurance (SSDI) for people with disabilities; and Supplemental Security Income (SSI) for people with limited income and financial resources. Any of these programs can be subject to numerous types of fraud.

According to the SSA, the list of potential frauds includes:

  • Making false statements on a claim. One example: when a person applies for Social Security benefits and provides information that they know to be untrue.
  • Concealing facts or events. Failure to reveal information that could affect the person’s eligibility is also fraud.
  • Misuse of benefits by a representative payee. If a relative or friend mishandles benefits for someone who is incapacitated, that is considered fraud.
  • Buying or selling real or fake Social Security cards or numbers. People who steal Social Security numbers and use them to obtain benefits illegally are committing fraud.
  • Criminal behavior by SSA employees. This could involve using insider access to obtain illegal benefits or to help another person obtain illegal benefits.
  • Impersonation of an SSA employee. Older people, in particular, are often exploited by criminals who claim to be SSA representatives and ask for money or personal information, including Social Security numbers.
  • Bribery of an SSA employee. SSA employees are not allowed to accept gifts or money in exchange for services. If they do, then they have committed fraud.
  • Violating standards of conduct. All SSA employees are bound by standards of conduct.
  • Workers’ compensation misrepresentation. When someone receiving SSA benefits becomes entitled to workers’ compensation, it must be reported to the SSA. Failure to disclose that is considered fraud.
  • Misuse of grant or contract funds. Waste or mismanagement in the processing of SSA contracts and grants.
  • Misuse of Social Security numbers for the purpose of committing terrorist acts. If anyone with links to terrorist groups or organizations facilitates this, then it is fraud.

What Is the Cost of Social Security Fraud to U.S. Taxpayers?

Because people are often asked for their Social Security numbers to identify themselves in financial transactions, the numbers are a favorite target of identity thieves. Social Security numbers that have been obtained through theft or trickery can be used to obtain credit cards or other loans, open bank accounts, and even to apply for a job.

Criminals also use illegally obtained Social Security numbers to file false income tax returns and collect fraudulent refunds. The Internal Revenue Service (IRS) uncovered $2.3 billion in tax fraud schemes in 2020.

The perpetrators of these frauds aren’t just small-time crooks but often “large criminal enterprises with individuals at all stages of the scheme: those who steal the Social Security Numbers (SSN) and other personal identifying information, those who file false returns with the Internal Revenue Service (IRS), those who facilitate obtaining the refunds, and the masterminds who promote the schemes,” the U.S. Department of Justice says.

Individual taxpayers often discover that their Social Security number has been stolen only when they file their own tax returns for the year and receive a notice from the IRS that there appears to be a problem. If they are due a legitimate refund, then they can still receive it, but only after completing the necessary steps outlined by the IRS. Ultimately, U.S. taxpayers as a group are stuck with the bill for fraudulent refunds.

Scam artists not only impersonate Social Security employees but also can “spoof” your Caller ID so it appears that the call is coming from a legitimate Social Security phone number.

Social Security Scams Against Consumers

Individual consumers can also be the victims of Social Security-related frauds. Particularly common are imposter scams, where a caller (either a real person or a robotic voice) will claim to be from the SSA. The goal often is to obtain the victim’s Social Security number and other personal information for identity theft purposes. But in other cases, the caller will demand money from the victim—for example, threatening to cut off their Social Security benefits if they don’t comply.

Similar imposter scams are carried out through email, text message, or regular mail. Through the second quarter of 2021, the Federal Trade Commission (FTC) collected 28,944 reports of imposter scams involving Social Security, with total losses of about $12 million. And, of course, untold numbers of scam victims never file reports, often out of embarrassment.

How to Report Social Security Fraud

If you’re a victim of Social Security fraud, or if you believe you have witnessed it, then you can contact the fraud hotline of the SSA Office of the Inspector General (OIG) at 1-800-269-0271 or file a report online at the OIG website.

You can also file an identity theft report at IdentityTheft.gov, an FTC website that helps consumers report ID theft and set up a recovery plan.

Articles You May Like

Data centers powering artificial intelligence could use more electricity than entire cities
Small Caps: Unexpected Outperformance Could Drive Gains in a Hurry
Video platform Rumble plans to buy up to $20 million in bitcoin in new treasury strategy
Activist Ananym has a list of suggestions for Henry Schein. How the firm can help improve profits
5 Moonshot Stocks to Buy for 2025