Expanded Government Funds for Foster Youth Could Pose Risk of Fraud
With a pummelled economy and the COVID-19 pandemic stretching into year two of its assault on society’s most vulnerable, California foster youth have had access to new help from the government that raised them: There are state and federal stimulus checks, expanded tax relief measures and even a new guaranteed basic income.
These new and expanded lifeline programs can put money directly into the pockets of youth without family support, who are more likely to end up unemployed, homeless and struggling to feed their own children and to get through school.
But with the growing access to financial assistance has come new opportunities for young adults who have survived childhood trauma to become victimized yet again — and new possibilities they will miss out on money owed to them.
Public policy experts and youth advocates in the nation’s most populous state say fraud, scams and lack of access are making it hard for current and former foster youth to receive the money they so desperately need right now. Some simply do not know how to access the lifeline funds. Others suffer because so much of their personal information is so widely circulated among multiple caregivers and government agencies.
“It happens a lot in foster care,” said Chris Torrez, a 25-year-old mother of three in Bakersfield, California. “There are so many people that handle your case who have your Social Security card, have your number and your date of birth, so it happens. Even your biological parents can do it.”
While identity theft and tax fraud can be ever-present, there is often little support to fix the problems. Social workers and service groups do not always advise foster youth of tax deadlines, services, deductions and credits they are eligible for, and there are no federal or state outreach materials designed specifically to reach them, advocates say.
Torrez is always hesitant to get help filing her taxes — particularly after discovering years ago that someone had used her name to buy a Verizon cellphone and racked up debt on a bill. Although she was able to close the account, she said she still owes the cellphone company money, and her credit score has tanked.
And this year, filing for 2020 taxes, she encountered financial loss yet again when she discovered someone else had claimed her youngest child as a dependent and received the thousands of dollars in tax credits she was owed for the little boy’s care.
California attorney Elizabeth Wells, whose nonprofit firm represents Santa Clara County foster youth, said her clients have long faced ravaged credit and stolen identities. But during the pandemic, the problems have been particularly acute and have involved tax fraud.
Foster youth represented by the Law Foundation of Silicon Valley have been encouraged to file taxes so they can receive stimulus checks, “only to find out that someone had used their Social Security number to file a fraudulent tax return,” Wells said. “So when they tried to file a return electronically, it was rejected.”
Wells said others lose out because relatives fraudulently claim them as dependents on tax returns or file for unemployment benefits in their names, making it impossible for the foster youth to draw down their own social safety benefits.
To counteract these trends, Wells joined a local initiative in November that included the San Francisco-based John Burton Advocates for Youth (JBAY), the Santa Clara County Social Services Agency, the California Franchise Tax Board and the Internal Revenue Service. The groups are working with other agencies to help current and former foster youth file their taxes and ensure they receive the tax credits and stimulus payments they’re entitled to. The pilot project established a center for free tax assistance staffed by volunteers, added tax preparation specialists to county staff, and conducted youth-friendly outreach campaigns.
The 45 young people who filed taxes through the program run out of the community center known as The Hub in Santa Clara received a total of more than $135,000 in state and federal tax refunds, with an average tax refund per youth of $2,822. The income increased their adjusted gross income by 17%. Parenting foster youth received even more, with an average tax refund of $6,605, increasing their adjusted gross income by 42%.
In a report on the project published last month that included the circumstances of the 45 “transition-age” foster youth, as many as 15% experienced someone fraudulently claiming their tax refund. To refile for tax relief, they had to be instructed to use an “identity theft pin,” or could not file electronically — complicating an already confusing process.
“Since the start of the pandemic, there has been a drastic increase in fraud and identity theft across the board,” Wells said, with scammers filing fraudulent tax returns to get stimulus money and tax refunds. In that environment, she added, “foster youth have not been spared.”
There’s also plenty of new money to go after. This year and last, the federal government funded three stimulus payments distributed through IRS tax information, totaling $3,200 for individuals and $7,900 for those with one child.
But JBAY found that while as many as two-thirds of current and former foster youth have faced employment challenges this year, many did not receive a stimulus check because they didn’t file or even know how to file their taxes. Others were claimed as a dependent by a previous caregiver or experienced identity theft or tax fraud.
The advocacy group’s survey revealed that 37% of California foster youth had not received a federal stimulus payment.
The issue surfaced even more recently. As of late last month — days before the deadline — just 6,000 of 31,100 eligible young people ages 18 through 20 had been verified to receive one-time federal pandemic relief funds for foster youth totaling between $600 and $1,500 per person, according to the California Department of Social Services.
The state also broadened eligibility for child tax credits and earned income tax credits — amounting to thousands of dollars per person, and including older foster youth who are not parents. But those payments rely on tax filings that are not always completed. A recent report by the California Policy Lab found that the tax credit was not reaching hundreds of thousands of those eligible, such as the former foster youth who are unaware or who do not file taxes.
Tax credits and refunds are vital for this population. Long-term research conducted by the University of Chicago’s Chapin Hall found that transitioning foster youth are significantly more likely to live below the poverty line than their peers. By age 21, roughly one-quarter had been homeless.
Alexis Barries, a 27-year-old former foster youth who lives in Stockton and works as a youth advocate at JBAY, thinks her finances might have been in better shape had she and her caregivers received more education early on about how to file taxes. Barries has worked since age 14, and long filed her taxes with bad advice and help that was either costly or misinformed — such as filing contract work as if she had a salary job. Today, she said she owes the IRS about $32,000.
Barries said she has also been the victim of identity theft, with cable, phone and electricity accounts opened fraudulently in her name, leaving her in debt for things she never signed up for. Later she made another ill-advised move that she now regrets — filing for bankruptcy protection that offered little of the relief she anticipated.
Getting control of her finances and figuring out her taxes has been one of the biggest stressors in her life, Barries said. As part of JBAY’s campaign this year, she received assistance from her colleague Anna Johnson, the group’s senior project manager of housing and health. Together they spent hours on the phone with the IRS and set up a payment plan.
Without such help, “we’re disposable humans, in a sense,” Barries said of many of her peers who grew up in foster care. “It really affects people long-term like myself. Who’s here to help me get through it when I don’t have a network of people and don’t have parents?”
In 2011, Congress passed legislation that requires child welfare agencies to look annually at the credit reports for foster youth after they turn 16, to protect their credit and discover potential identity theft. But there is no similar legislation to identify tax fraud.
And even when fraud has been discovered, the consequences can follow a young person for years, further eroding their trust in caregivers and institutions.
Torrez, for example, said she was hesitant to get help filing her taxes, for fear of exposing her personal information to yet another person. Growing up in foster care, so much personal information is so widely shared — children’s deepest traumas and struggles recounted time and again in social worker reports, court hearings and interviews with caseworkers and foster parents.
Torrez overcame her reluctance. She found free tax help in Bakersfield, and as a result received about $5,000 from the IRS. Combined with the state and federal stimulus checks, she was able to use that money to pay off bills that had been piling up since she was laid off from her job last year as a liaison and receptionist with the Board of Supervisors in Kern County.
But too often, Wells said, fraud and tax-filing challenges encountered by foster youth are unknown and unaddressed because there is no state or national tracking of the problem. The Federal Trade Commission has an identity theft dashboard that displays things such as the top fraud reports by state and reported loss amounts by age, but there is no data collected specific to children raised in foster care.
“If we’re going to be able to really do something about this problem, we need to fully understand all of the various forms of foster youth identity theft,” Wells said. That will include youth-serving agencies coordinating and collecting data to figure out which problems are most pronounced. “Then,” she added, “we can start to put some solutions in place to address it.”