IRS faces fraud and identity theft questions

Jul 03, 2012

The IRS has some explaining to do. It faces questions from both Congress and an IRS advisory committee regarding the growing problem of identity theft-related tax fraud.

The House Judiciary Committee’s Crime Subcommittee held a hearing last Thursday on the growing problem of identity theft and income tax preparation fraud.

“The number of these thefts has increased by approximately 300% every year since 2008,” said Judiciary Committee Chair Lamar Smith, R-Texas. “The IRS detected almost one million fake returns among  2010 returns alone. Tax return identity theft is a very real problem. Congress should do all it can to protect citizens from this crime.”

Smith is one of the original co-sponsors of H.R. 4362, the “Stop Identity Theft Act of 2012,” with Congresswoman Debbie Wasserman Schultz, D-Fla., a bipartisan bill that strengthens criminal penalties for tax return identity thieves. H.R. 4362 adds tax return fraud to the list of predicate offenses for aggravated identity theft and expands the definition of an “identity theft victim” to include businesses and charitable organizations. It also improves coordination between the Justice Department and state and local law enforcement in order to better protect groups that are most vulnerable to tax fraud so they are not future victims.

Among those testifying was National Taxpayer Advocate Nina Olson, whose report to Congress last week noted the problem of taxpayer identity theft. 

Meanwhile, in its 2012 Annual Report to Congress, the Electronic Tax Administration Advisory Committee cited the IRS for lax infrastructure standards regarding security, privacy, fraud prevention, and e-authentication.