IRS Changes Identity Theft Policy

The Internal Revenue Service has agreed to change its policy on identity theft and provide victims with copies of the fraudulent tax returns that have been filed under their names by scammers.

The move comes in response to a request from Sen. Kelly Ayotte, R-N.H., who wrote to IRS Commissioner John Koskinen last month urging the IRS to provide tax-related identity theft victims with copies of fraudulent returns, which the agency had refused to do, citing privacy concerns.

In response to Ayotte on Thursday, Koskinen wrote, “As a result of your letter, we have decided to change our policy regarding disclosure of fraudulent identity theft returns to victims whose name and SSN the fraudulent return was filed under...We will put together a procedure that will enable victims to receive, upon request, redacted copies of fraudulent returns filed in their name and SSN.”

Ayotte said she is pleased with the change in policy. "I'm glad that the IRS has agreed to my request to reverse its policy and provide identity theft victims with copies of fraudulent tax returns so they can take proper steps to secure their personal information,” she said in a statement last Friday. “Victims of identity theft face significant emotional and financial hardships, and they shouldn't be left in the dark about the extent of the theft. This is a positive step that will help them protect themselves and their families."

Ayotte said she became aware of the issue after hearing from New Hampshire victims of identity theft who told her that the IRS's refusal to provide copies of fraudulent tax returns prevented them from knowing what information was stolen.

Last month, Ayotte helped introduce the Social Security Identity Defense Act of 2015, which would require the IRS to notify potential victims of identity theft, something the agency has failed to do in the past. It also requires that the IRS notify law enforcement and that the Social Security Administration notify employers who submit fraudulently used Social Security numbers. The bill adds civil penalties and extends jail time for those who fraudulently use an individual's Social Security number.

The IRS revealed a massive data breach last week in which criminals managed to access approximately 104,000 tax returns by using the IRS’s online Get Transcript application (see IRS Detects Massive Data Breach in ‘Get Transcript’ Application). Koskinen will be facing a hearing Tuesday before the Senate Finance Committee on Tuesday to explain the breach.

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Tax practice Tax fraud Data security
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