What is it costing taxpayers?

Social Security fraud statistics can be hard to track down. Some are grouped into a larger category that the Social Security Administration (SSA) calls “improper payments,” which includes everything from innocent mistakes to intentional fraud. The SSA estimates it made about $8.3 billion worth of improper payments during fiscal year 2020.

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

Basic Takeaways

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

What is Social Security fraud?

Although 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 scams includes:

  • Making false statements about a claim. An example: when a person applies for Social Security benefits and provides information they know to be untrue.
  • Hiding facts or events. Failure to disclose information that could affect a person’s eligibility is also fraud.
  • Abuse of benefits by representative payee. If a relative or friend does not handle benefits for someone who is incapacitated, this is considered fraud.
  • Buying or selling real or fake Social Security cards or numbers. People who steal Social Security numbers and use them to get benefits illegally are committing fraud.
  • Criminal Conduct of SSA Employees. This could include using insider information to obtain illegal benefits or to help another person obtain illegal benefits.
  • Impersonating an SSA employee. Seniors, 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 SSA employee. SSA employees may not accept gifts or money in exchange for services. If they do, then they have committed fraud.
  • Violation of standards of conduct. All SSA employees are bound by standards of conduct.
  • Misrepresentation of workers’ compensation. When someone receiving SSA benefits is eligible for workers’ compensation, they must report to the SSA. Failure to disclose is considered fraud.
  • Misuse of grant funds or contracts. Waste or mismanagement in the processing of SSA contracts and grants.
  • Misuse of social security numbers for the purpose of committing acts of terrorism. If someone with ties to terrorist groups or organizations facilitates it, then it is a scam.

What is the cost of Social Security fraud to US taxpayers?

Because people often ask for Social Security numbers to identify themselves in financial transactions, the numbers are a favorite target for identity thieves. Social Security numbers obtained through theft or fraud can be used to get credit cards or other loans, open bank accounts, and even apply for jobs.

Criminals also use illegally obtained Social Security numbers to file false income tax returns and collect fraudulent refunds. The Internal Revenue Service (IRS) uncovered $10 billion in tax fraud schemes in 2021.

The perpetrators of these scams are not just petty crooks, but often “large criminal enterprises with people at all stages of the system: those who steal Social Security Numbers (SSNs) and other personal identification information, those who file false statements with the Internal Revenue Service ( IRS), those who facilitate the receipt of refunds and the masterminds behind the schemes,” the US Department of Justice reports.

Individual taxpayers often only discover that their Social Security number has been stolen 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 legitimately owed a refund, then they can get it, but only after completing the necessary steps outlined by the IRS. Ultimately, US taxpayers as a group are stuck with the bill for fraudulent refunds.

Scam artists not only impersonate Social Security workers, but they can also “spoof” your caller ID to make it appear that the call is coming from a legitimate Social Security phone number.

Social Security fraud against consumers

Individual consumers may also be victims of Social Security-related fraud. Especially common are scammers, where a caller (either a real person or a robotic voice) will claim to be from the SSA. The goal is often 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, by threatening to cut off their Social Security benefits if they don’t comply.

Similar scammers run through email, text messages, or regular mail. During the second quarter of 2022, the Federal Trade Commission (FTC) collected 17,995 reports of fraud involving Social Security fraudsters, with total losses of approximately $46 million. And, of course, untold numbers of fraud victims never file reports, often out of embarrassment.

How to report Social Security fraud

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

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

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