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Tuesday September 1, 2015

Washington News

Washington Hotline

IRS Increases Efforts to Reduce Identity Theft

On August 26, Sen. Kelly Ayotte (R-NH) held a hearing of the Senate Budget Committee in Manchester, New Hampshire. Sen. Ayotte expressed concern about the growth of tax-related identity theft.

She stated, “Tax-related identity theft is a serious problem that is growing at epidemic proportions. According to the Treasury Inspector General for Tax Administration, about 2.4 million taxpayers’ names or Social Security numbers were used to file fraudulent tax returns in 2013. That is nearly a tenfold increase since 2010.”

IRS Commissioner John Koskinen agreed that from 2010 to 2012 there was a substantial increase in identity theft. He noted that identity theft, “for a time overwhelmed law enforcement and the IRS.”

However, Koskinen reported progress for 2013. During that year the IRS prevented $24.3 billion in identity theft refund fraud. Nevertheless, an estimated $5 billion in fraudulent refunds was paid during 2014.

The first witness at the Senate Budget Committee hearing was a New Hampshire mother whose daughter Maddi lost her life in a tragic car accident. Maddi’s Social Security number was stolen and three tax returns were filed claiming refunds. When the New Hampshire mother contacted the IRS, they refused to disclose the fraudulent returns to her.

As a result, Sen. Ayotte and other Senators from both parties responded by introducing the Social Security Identity Defense Act of 2015. The bill requires the IRS to notify individuals if a Social Security number has been stolen. In addition, the Social Security Administration must notify employers of any stolen Social Security numbers.

Attorney Christopher Lee of the Taxpayer Advocate Service (TAS) described federal government efforts to assist taxpayers. TAS Case Advocates work with taxpayers and the IRS to resolve identity theft cases.

Lee explained the two types of identity theft. First, a thief may obtain a Social Security number and file early in January or February to claim a refund. When the victim files, his or her refund will be delayed by two to six months to resolve the identity issue.

Second, some individuals will use the Social Security number of another person to obtain employment. They often will have low or no withholding. At the end of the year, the employer will issue a W-2 with the Social Security number of the victim. The identity thief has received the income and pays no income tax. When the victim files his or her tax return, the IRS will catch the underreporting and demand payment for additional taxes from the victim.

The Taxpayer Advocate Service is working with the IRS to improve administration of identity theft cases. TAS claims that a more centralized approach will result in better taxpayer service and quicker resolution of identity theft cases.

Published August 28, 2015
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