'A scammer stole my tax refund'

April 17, 2014: 7:46 PM ET
pamela knighton
Social worker Pamela Knighton had her tax refund stolen by an identity thief last year.
NEW YORK (CNNMoney)

Pamela Knighton, a 51-year-old social worker from Cuthbert, Ga. who earns less than $25,000 a year, had been really looking forward to her tax refund of around $1,000 last year.

But when she filed her taxes last February, her return was rejected. An IRS agent told her that someone had already filed a tax return in her name and the refund had been deposited into a bank account in Minnesota -- a state Knighton has never even visited.

The agency promised to launch an investigation into her missing refund, but told her it would take at least six months. (The IRS says the average investigation takes between four and four-and-a-half months, but could last longer based on the complexity of the case.)

She wanted the money back sooner so she started her own investigation, calling the bank in Minnesota and reporting the fraud to her local police department.

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"In between being busy at work I would use lunch as an excuse to try to find out what was going on," said Knighton.

She didn't turn up any leads, however, so she was forced to sit tight.

Worried that the scammer had taken mail from her mailbox to steal her information, she opened a post office box. She also notified her bank, bought identity theft protection that alerts her of any suspicious activity on her credit report, and started watching the activity on her checking account like a hawk.

Related: 'How I'm using my tax refund'

More than six months later, Knighton received her refund. But the IRS wouldn't tell her whether the identity thief was caught -- the agency says it won't disclose the information for privacy reasons. So now she worries that the thief is still out there and could use her information again -- whether it's to open a credit card or bank account in her name, or drain her checking account.

Any of these scenarios would be devastating to her finances.

"I'm one of the working poor and don't have a lot of money -- I work for a social service agency that doesn't pay that much, I'm still trying to buy my own home and I'm always running low on my [bank] account," said Knighton.

Related: 10 tax audit red flags

Plus, she worries that the thief will ruin the nearly perfect credit score she's worked so hard to attain.

"It has been very stressful -- I've stayed up plenty of nights over this," said Knighton, who has been getting advice from nonprofit Identity Theft Resource Center about how to protect her identity going forward.

Identity theft is a growing problem for both taxpayers and the IRS, which is struggling to keep up with record levels of fraud amid a constantly shrinking budget. The IRS has already launched 295 new investigations into tax-related identity theft so far this filing season. Typically, most investigations are launched later in the year. Last year, the number of identity theft investigations surged to 1,492 -- up 66% from 2012 and more than 400% from 2011.

"We know identity theft is a frustrating process for victims," an IRS spokeswoman said. "Identity theft is one of the fastest growing crimes nationwide, and refund fraud caused by identity theft is one of the biggest challenges facing the IRS."

Correction: An earlier version of this story misstated the amount of money Pamela Knighton received as a tax refund last year.
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