WASHINGTON, D.C. – With one month to tax day, U.S. Sen. Sherrod Brown (D-OH) alerted Ohioans to a rise in tax identity theft and announced new legislation that would help crack down on fraudulently-filed tax returns. According to the Federal Trade Commission (FTC), more than 9,000 Ohioans reported complaints of identity theft in 2014 – ranking Ohio 20th in the nation.
“Tax fraud costs our government money, wastes resources, and hurts taxpayers,” Brown said. “This tax season, we need to do everything possible to protect Ohioans’ from identity theft and help victims access the help to recover the money they’ve earned. That’s why the Identity Theft and Tax Fraud Prevention Act is so important. Ohio’s taxpayers work hard, follow the rules, and deserve peace of mind and the refunds they’ve earned when they file their taxes.”
Brown was joined by Ralph Wolfe, a Cincinnati taxpayer whose wife’s identity was stolen and who reached out to Brown’s office for help processing the return. The Wolfes are not alone. A Government Accountability Office (GAO) analysis of Internal Revenue Service (IRS) tax data revealed an estimated 5.1 million detected attempts at identity theft refund fraud – amounting to $30 billion worth of fraudulent returns. GAO also found that victims wait an average of more than 300 days for their case to be resolved.
The IRS estimates it prevented 4.1 million cases of fraudulent identity theft returns worth more than $24.2 billion, but paid $5.8 billion of returns later determined to be identity theft fraud. As a result of aggressive efforts to combat identity theft, the IRS has stopped 19 million suspicious returns and protected more than $63 billion in fraudulent refunds from the beginning of 2011 through October 2014.
The Identity Theft and Tax Fraud Prevention Act of 2015 would build on this progress by imposing tougher penalties on criminals who commit tax fraud using a stolen identity. A bill summary is available here and some of the bill’s provisions are below:
- Protecting Victims: The bill would expedite the resolution of identity theft cases by directing the Treasury Secretary to establish a plan of action for closing identity theft cases within 90 days. It would also allow the IRS to issue a Personal Identification Number to victims of identity theft who have not yet had their tax account compromised. Individuals would have the option to turn off the ability to electronically file for their account. The bill would also allow the IRS to advise victims when their information is used in a tax fraud scheme and the criminal is charged with a crime, giving victims the ability to pursue civil action against the perpetrators.
- Shutting Down Schemes: The bill would direct the Treasury Secretary to limit the number of refunds that can be sent to an individual direct deposit account or mailing address. The bill would also direct the GAO to study customer identification procedures used by the prepaid card industry.
- Protecting Social Security Numbers: The bill phases out unnecessary storage and display of social security numbers (SSN) by Medicare and private health care providers. The bill imposes new civil and criminal penalties for selling, purchasing, or publicly displaying an individual’s social security numbers without informed consent.
- Improving Enforcement: The bill would increase the maximum penalty for tax-related identity theft from three years imprisonment and a $100,000 fine to five years imprisonment and a $250,000 fine. The bill would also increase the civil penalty for preparers who improperly disclose or sell return information to $1,000 per disclosure, capped at $50,000. The criminal penalty would be increased to a maximum of $100,000 per conviction. The bill would allow the IRS to require only a taxpayer’s truncated SSN or other identification number on a W-2 form, removing an unnecessary risk of identity theft, and amend the law to clarify that the Treasury and IRS have the authority to regulate all paid tax return preparers.
The IRS advises taxpayers to be alert to the warning signs of possible ID theft. The three key signs are:
- More than one tax return has been filed using your SSN;
- You owe additional tax or have a collection against you for a year in which you did not file a tax return; and
- IRS records indicate you received wages from an unknown employer.
Brown also released a list of tips from the IRS to help taxpayers protect themselves from becoming victims of identity theft:
- Don’t carry your Social Security card or any documents that include your SSN or Individual Taxpayer Identification Number (ITIN).
- Don’t give a business your SSN or ITIN just because they ask. Give it only when required.
- Check your credit report every 12 months.
- Review your Social Security Administration earnings statement annually.
- Secure personal information in your home.
- Protect your personal computers by using firewalls and anti-spam/virus software, updating security patches and changing passwords for Internet accounts.
- Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with.