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“There are hundreds of thousands of cases out there now in which unsuspecting and law-abiding taxpayers are having their lives turned upside down by identity theft and tax fraud. Having their refunds stolen, and then delayed while the IRS sorts out the mess, is unfair and unjust,” Nelson said in an opening statement Tuesday during a hearing of the Senate Finance Subcommittee on Fiscal Responsibility and Economic Growth, which he chairs.
Not only is the wait frustrating, so, too, the lack of information.
“I’d like a copy of the return to see what other information they have. Were there brokerage statements?” asked tax fraud victim Ed Wagoner, who has been waiting for a refund for almost a year after discovering someone had already filed taxes using his Social Security number.
When Wagoner requested information on the fraudulent return, “(the IRS) said, it’s a privacy issue, we can’t give you this. Privacy? It’s ostensibly my information. What’s private about it?”
The IRS is prohibited by statute to share information on tax returns, something that has even hindered law enforcement actions, according to Nugent.
“We understand this is an incredibly frustrating process for victims,” IRS spokesman Dobzinski wrote in an email. “Once we have been alerted to the possibility of identity theft we must fully examine the account.”
Steven Miller, deputy commissioner of the Internal Revenue Service, in remarks to the Senate subcommittee, outlined a number of steps the IRS is taking to address identity theft tax fraud. Miller added it is a priority for 2012.
An enhanced return processing program was begun in 2011, Miller said, which added new screening filters to “to spot false returns before they are processed and before a refund is issued.” As of March 9, 2012, Miller said, 215,000 questionable returns with $1.15 billion in claimed refunds were caught by the filters.
Also at the hearing, Nelson outlined his proposed legislation, the Identity Theft and Tax Fraud Prevention Act. Among the things the bill would do is strengthen penalties for identity theft tax fraud, allocate more government resources to tax fraud detection and prevention, give victimized taxpayers a personal identification number to avoid refund delays and give taxpayers an opt-out option for filing electronically. Electronic filing has facilitated the growth of the scam.