Senators Push IRS to Do More to Combat Tax Refund Fraud and Identity Theft

A bipartisan group of 15 senators has written to the Internal Revenue Service urging the agency to do a better job of preventing tax refund fraud using stolen identities.

In a letter Monday to IRS commissioner John Koskinen, they pointed out that an estimated $5.2 billion was lost to fraudulent tax returns in 2013, according to the Government Accountability Office. “We understand that the IRS may not be able to stop all refund fraud, but a lot more can be done within the IRS’s current authority to reduce the risk of fraud and improve taxpayer services,” the senators wrote.

They asked Koskinen to provide an update on what the IRS has been doing in a variety of areas, including accelerating the verification of tax return information.  “By law, the IRS has 45 days after a return is due to issue a refund without interest, yet refunds are typically issued just 9.6 days after a return is filed, according to the GAO,” the senators pointed out.

The lawmakers also asked about providing victims of tax-related identity theft with a single point of contact, as recommended by the National Taxpayer Advocate for several years, as well as allowing taxpayers to “turn off” electronic filing. 

“More than 80 percent of tax-related identity theft occurs through electronically filed tax returns,” the senators wrote. “Shouldn’t taxpayers have the option to disable any electronic filing of their tax return?” 

They also asked about allowing any taxpayer to request an identity theft PIN, regardless of whether or not they have been a confirmed victim of identity theft.  

“We understand that the IRS has launched a pilot program to allow anyone in states with high fraud rates to request an identity theft PIN,” said the lawmakers. They asked for an update on any efforts to convert this pilot program into a nationwide program.

In addition to the need for improving IRS’s existing safeguards and services, the senators said they are also concerned that the IRS has yet to devise a comprehensive plan to address the problem, if it were given additional resources. “With billions of dollars at stake, we believe that finding a solution to the problem of identity theft-related refund fraud should be a top priority for the IRS,” they wrote.

They also asked Koskinen a series of questions about efforts to combat identity theft and tax refund fraud, including what further action, if any, does the IRS intend to take to combat this problem prior to the next tax filing season.

“This is a chronic problem,” said Sen. Charles Grassley, R-Iowa, former chairman and ranking member of the Senate Finance Committee, which has jurisdiction over the IRS. “The IRS should make fixing it a high priority. Identity theft is devastating for victims and when it comes through the IRS, it undermines the integrity of the tax system.”

Other senators who signed the letter included Kelly Ayotte, R-N.H., Richard Blumenthal, D-Conn., Ben Cardin, D-Md., Thad Cochran, R-Miss., Mike Enzi, R-Wyo., Kirsten Gillibrand, D-N.Y., Johnny Isakson, R-Ga., Mark Kirk, R-Ill., Amy Klobuchar, D-Minn., Bill Nelson, D-Fla., Jack Reed, D-R.I., Pat Roberts, R-Kan., Charles Schumer, D-N.Y., and Roger Wicker, R-Miss.

For reprint and licensing requests for this article, click here.