National Consumers Week

The message today from the IRS is don’t get involved in these credit repair schemes.

In 1994, Treasury Inspector General for Tax Administration (TIGTA) initiated investigations into numerous schemes to modify an Employer Identification Number (EIN) into the sequence of a Social Security Number (SSN) in order to create a new credit history. During these investigations it was learned that certain individuals are obtaining the EINs by either filing incomplete/inaccurate SS-4 Forms, misrepresenting information utilizing the telephonic Tele-TIN system or simply creating their own SSNs. Ideally, these EINs are the identifying numbers that the IRS assigns to businesses. The information associated with EIN’s is also used by the Dept. of Labor and the Social Security Administration. The EIN issuance process was created to ensure that taxpayers/businesses had a unique number enabling them to file their tax returns, which compliments future compliance efforts. Abuse of the stated purpose for which EINs were created can adversely affect the administration of the nation’s tax system.

TIGTA has conducted 108 criminal investigations in 11 states of individuals who sold and/or used the EIN scheme to defraud creditors. To date, 58 of these subjects have been indicted or pled guilty to charges including Mail Fraud, Bank Fraud, Conspiracy, False Applications, and Misuse of a SSN. There are 17 pending prosecutions and 19 open investigations of this scheme. TIGTA has identified an additional 205 individuals who have obtained an EIN, changed its format, and completed fraudulent loan applications for credit.

These new credit schemes have an impact both on businesses and on individuals. In our investigations we found that individuals involved in this scheme received over 1.85 million in fraudulent credit from businesses. Many of these individuals are unable to repay the money therefore causing the businesses to absorb the loss.

Officials familiar with this scheme estimate that between 300 – 400 million dollars in fraudulent loans and credit has been established across the country.

Another area of concern is when the false SSN (generated from an EIN) does match a current and legitimate SSN. An example is South Carolina’s “57” EINs, which also happen to be the same two prefix numbers for SSNs issued in California. The false credit information could create havoc with assigned, legitimate tax records, Social Security data and with creditors and businesses in general.

The scheme's promoters advertise their credit repair programs in newspapers throughout the United States. These newspapers include the USA Today, Wall Street Journal, The Army Times and numerous local publications. Direct mailers have also been used based upon information promoters recorded from bankruptcy proceedings. There is also a growing trend to advertise across the Internet. There are common procedures employed by each credit repair program. For a payment of anywhere between $49.99 and $399.99 individuals can either purchase an EIN from a promoter of the scheme or an instructional package that explains how to obtain an EIN.

Once obtained the purchaser can change the order of the number to make it appear as a SSN. Many of the packages proclaim to be “Absolutely Legal” or “100% Guaranteed” and some go as far as claiming to be endorsed by the Federal Government. It is important to note that the EIN need not match a real persons SSN for the scheme to succeed. Information in the package encourages the purchaser to use an address of a friend when submitting a request for an EIN to one of the specified IRS service centers. The package also educates the purchaser that to avoid being detected by the credit bureaus, certain personal information must be modified on any credit applications. A credit bureau associates a credit history with the appropriate individual by matching two unique identifiers, such as name, SSN, address or telephone number. Altering these identifiers will obstruct a credit bureau from identifying an individual's poor credit history.

To provide information regarding the fraudulent use of EINs, please contact the Treasury Inspector General for Tax Administration Hotline at 1-800-366-4484.