Opening Statement at Hearing on Tax Identity Theft

June 2, 2011 hearing of the Subcommittee on Government Organization, Efficiency and Financial Management - Chaired by Congressman Todd Platts

The purpose of today’s hearing is to shed light on the growing problem of identity theft-related tax return fraud.  Each year, thousands of American taxpayers fall victim to criminals who steal their identities and then use their personal information to claim fraudulent tax refunds.

It can be shockingly simple to steal someone else’s tax return.  All an identity thief needs is a victim's name and Social Security number.  W-2s are not required, so a criminal can make up salary, withholding, and other figures.  The IRS is unable to verify these figures until much later in the year, when it receives W-2s from employers.  By that time, it is too late and the identity thief has already received a fraudulent tax refund.

Both the General Accountability Office and the Treasury Inspector General for Tax Administration have raised awareness of the growing problem of tax related identity theft in annual reports.  In response, the IRS has begun to take steps to address tax fraud.  It has implemented more intensive screening procedures for e-File returns, with filters designed to flag fraudulent returns.  It has also put in place numerous provisions to help taxpayers after fraud has occurred.  The IRS created a new unit to help identity theft victims, and is starting to issue personal identification numbers to legitimate taxpayers who have been victims of identity theft in order to increase security on their returns.

While the IRS deserves credit for its efforts to recognize and address the issue of identity theft as it relates to taxes, this is a huge and growing crime victimizing more and more law-abiding citizens every year.  More must be done not only to stop tax fraud, but to help the innocent victims once the fraud has occurred. 

Victims usually do not know there is a problem until they file their own tax return and receive a response from the IRS that their return has already been filed.  The IRS has established the Identity Protection Specialized Unit to help victims, but according to numerous accounts, some of which we’ll hear today, the customer service many people receive from the IRS is far from helpful, courteous, or professional.

It’s bad enough that people are having their identities and tax refunds stolen, but victims must often spend hours on the phone, day after day, with IRS representatives who by too many accounts are unsympathetic and rude, trying to convince the IRS that they are who they say they are and have been defrauded.  It can often take up to six or more months for victims to satisfactorily prove who they are and finally get their tax return from the IRS.  The stories I have heard personally and have read about in the press concern me greatly – legitimate taxpayers who have been victimized deserve courtesy, understanding, and a quick resolution of their case.

I appreciate the willingness of today’s witnesses to appear before the Subcommittee to discuss the problems leading to identity theft-related tax fraud as well as what can be done to halt its spread and provide a better response to its victims.  I look forward to your testimony.