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Tax ID theft a growing scam: How to protect yourself

(CBS News) As millions of Americans prepare to file their taxes, scammers are out looking to steal their identities, and more importantly their refunds. Officials say it's a fast growing form of fraud that's affecting many people, and the U.S. Treasury estimates the $21 billion will be lost to this type of scam in the next five years.

Military families, in particular, have been impacted. When Adam Ray was killed fighting in Afghanistan, his parents never thought they'd have to worry about tax fraud. However, before they could file his taxes, someone else not only did it, but collected his $1,400 refund as well.

Tax software glitch delays 660,000 refunds

This type of crime is exploding because of two factors: first, online companies like Turbo Tax make filing taxes fast and easy; second, the IRS does not cross-check returns against employers payroll records in an attempt to get refunds out quickly. This leaves a lot of room for error.

Scammers are able to use both those factors to exploit consumers. They buy lists of names and social security numbers of living people on the black market, and they are able to troll family support websites to steal the identities of the dead.

"They scam dead veterans, they scam dead infants. They collect those identities and use them," said CBS News senior correspondent John Miller. He explains that these type of people are very easy targets for skilled con-men.

Tax refund theft is nation's fastest-growing fraud

CBS News Business and Economics correspondent Rebecca Jarvis has a few suggestions for people to get ahead of the curve and protect themselves.

"People need to go out and file earlier, the earlier you file the less likely it is that they can take your refund from you," said Jarvis. She also suggests never emailing the IRS, as they will not email you, so any email you see from them is someone trying to get information out of you, and keeping all tax information on a flash drive, not on your computer.