New Legislation Proposed to Prevent Tax Return Fraud

Not many people count paying their taxes as one of their favorite activities. The fact of the matter is citizens have a legitimate reason to complain about taxes and the IRS given the statistic that the government issues approximately $4 billion a year in fraudulent refunds to identity thieves.

Fortunately, new legislation is pending that will work to not only cut down on the fraud, but to keep citizens’ personal data safe from hackers and data breaches as well. What originally began the Congressional process as the Tax Refund Theft Prevention Act of 2014, introduced by Senate Finance Committee Chairman Orrin Hatch (R-Utah) and Ranking Member Ron Wyden (D-Ore.) last year, the legislation will now move on to the markup stage where committee members can introduce new provisions, debate the bill’s merits, and engage in further discussion.

“Tax refund fraud is a one-two punch for taxpaying individuals,” Hatch said. “Millions of taxpayers’ identities are compromised, and all taxpayers have their tax dollars wasted.  Our bill aims to address such fraud by enhancing the IRS’s capabilities in detecting fraud and by giving victims the assistance and safeguards they need to repair the damage done by tax theft criminals.  In order to further deter this crime, we make tax refund fraud a specific category of a felony offense and enhance security features for filers.  Hard-working American families deserve a government that protects both their tax dollars and their sensitive taxpayer information.”

As Senator Hatch originally stated when the bill was introduced last year, tax refund fraud is especially problematic for citizens. Not only do they not receive their legitimate refunds in a timely way, their identities have been compromised in the process of the fraud. That means the same thief who filed a fraudulent return in their names can then go on to commit countless other related crimes like benefits fraud, medical identity theft, and the opening of new lines of credit in the victim’s name. Of course, this issue works in reverse as well; someone who’s identity has been stolen and used for other purposes can find himself becoming the victim of tax refund fraud the next time tax season rolls around.

Unfortunately, this type of identity theft is so easy to commit that criminals of all types and levels—from petty street thugs to organized crime bosses—are turning to tax refund fraud, often to bankroll other criminal activities. Even notorious street gangs whose criminal activities have included drug dealing, prostitution, black market gun sales, and gun-related violence have turned to their computers to commit tax-related identity theft crimes, largely due to the massive potential payout with minimal physical risk. One California gang, Long Beach’s Insane Crips, netted over $3.3 million dollars of an attempted $11 million dollars in tax fraud before a sting operation brought them down.

The markup process of Senators Hatch and Wyden’s bill will begin on Wednesday, September 16th. Many of the original provisions are expected to remain in place, while new provisions may be added to ensure better citizen protection and fraud reduction.

 

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