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Senate Bill Would Increase Penalties for Taxpayer Identity Theft

September 14, 2011

A new bill introduced in the Senate would raise the criminal penalties for people who try to steal the tax refunds of others by using their Social Security or Taxpayer Identification Number.

The bill, introduced last Thursday by Sen. Bill Nelson, D-Fla., would make it a felony punishable by up to five years in prison and a fine of no less than $25,000 to use another taxpayer’s SSN or TIN.

The bill would also require the Internal Revenue Service to develop a nationwide PIN system that victims of identity theft could use on their tax returns. In addition, the bill would protect the Social Security numbers of deceased taxpayers by restricting public access to them. The IRS would also be required to improve its cooperation with state and local law enforcement in identity theft cases, among other things.

Bill Nelson

The changes had been sought by law enforcement authorities for some time. Nelson started working on the issue this year after inmates at a Florida prison were caught in a massive scam using tax forms to claim bogus tax refunds (see Florida Leads Nation in Prisoner Tax Fraud). In a more recent case about two weeks ago, a police task force in Tampa arrested 49 people who allegedly claimed up to $130 million in fraudulent tax refunds from identity theft victims.

“I have filed legislation to stop this rip-off of the taxpayers and our country’s Treasury where people are stealing others’ ID, then sending in a tax return in order to get a tax refund,” said Nelson in a video statement. “And that’s meant hundreds of millions of dollars lost, not even to speak of people trying to get back their stolen identity. This thing has got to stop. This is one of the biggest rip-offs of con artists that you’ve ever seen. These folks are using the tax system just like a thief would use a crowbar to break in and steal people’s money.”

Taxpayer identity theft is a growing problem for the IRS and tax practitioners. Many practitioners need to spend months trying to get refunds for their clients that criminals have stolen. Nelson’s bill could provide an important tool for both the IRS and law enforcement authorities to clamp down and put a stop to it.

Comments (1)
Look at your Social Security ID card. It plainly says this number is not to be used for identification. Yet almost since the day the plan was initiated, Americans' health, banking and insurance providers as well as the IRS have used it as such. Now, only because income taxes are impacted, does the Senate consider yet more tax law complication to prevent taxpayer identity theft. The reasons behind the bill are not as much for the altruistic protection of the individual as they are for preventing federal tax revenue loss. Here is yet another reason the present gargantuan productivity-punishing IRS tax collection system should be abandoned in favor of a more equitable consumption (federal sales) tax, such as the FairTax.
Posted by Nilsson | Wednesday, September 14 2011 at 12:13PM ET
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