A year ago in May, the ITRC posted ITRC Fact Sheet FS 143, which provided an overview of what the IRS was doing to combat identity theft, and help those victims who specifically had IRS issues because of tax problems created by the identity theft. The content of Fact Sheet 143 was provided by the IRS Office of Identity Protection, and this document is definitely a necessary starting point for anyone who has encountered issues with the IRS caused by returns being filed with your SSN, or reports of a work history that do not belong to you.

The IRS established internal procedures in 2009 to give IRS employees guidance on identity theft issues, and provided the IRS business units methods for handling the unique aspects of identity theft cases. Since 2008, the IRS has also provided a specialized identity theft unit as a service to taxpayers who have been victims of identity theft, and wanted to notify the IRS. This unit has a toll free number (1-800-908-4490) and will work with victims to review their taxpayer accounts and history, and provide guidance on what steps to take to mitigate their identity theft case. This unit has handles hundreds of thousands of consumer calls in English and Spanish. Using these methods, the IRS has been able to mark taxpayer accounts when identity theft has been indicated, establish communications with the affected taxpayer, and proactively investigate returns tied to marked accounts to prevent additional fraud on these accounts. In addition, those identified as identity theft victims may now receive an Identity Protection PIN to ensure that only their verified return is processed, and without delay.

So, what’s new?

In a hearing of the Congressional House Committee on Ways and Means on 5/8/2012, the IRS gave testimony that directly answers the question posed by this blog:

“Over the past few years, the IRS has seen a significant increase in refund fraud schemes in general and schemes involving identity theft in particular. Identity theft and the harm that it inflicts on innocent taxpayers is a problem that we take very seriously. The IRS has a comprehensive identity theft strategy comprised of a two-pronged effort, focusing both on fraud prevention and victim assistance.”

In the area of fraud prevention, the IRS noted that in 2011 identity theft screening filters were put in place to detect fraudulent returns before processing. This is a huge task given 100 million returns to process, and the fact that 10 million taxpayers move and 46 million change jobs each year. IRS has now instituted a correspondence with the sender of a flagged return before that return is processed, and is issuing Identity Protection PIN’s to those who are known to be identity theft victims. For the 2012 tax filing season, over 250,000 “IP PINs” were issued.

Prevention of tax fraud using the identity of deceased taxpayers is also being addressed. The IRS is coding deceased accounts that have been used fraudulently to prevent further future misuse, and marking the accounts of recently deceased taxpayers so that future attempt to use the account will be prevented. The IRS is also working with the SSA to shorten the time required to update Death Master File information into IRS records. They are also working with SSA on a potential legislative change which could help reduce the use of the Death Master File as a source for identity theft SSN’s. And, the IRS has developed methods to us information from law enforcement agencies to flag high risk accounts and help block returns that are filed by identity thieves. Altogether, it is apparent that the IRS is putting serious effort into identity theft prevention methods.

The IRS also testified about their efforts to ease the plight of identity theft victims. By the end of this fiscal year, they will have almost 2500 employees dedicated to identity theft work. In addition to the IP PIN program, IRS has dedicated significant training to employees and call center assistors in order to improve their response to identity theft victims. Coupled with a healthy taxpayer outreach and education effort, it appears to ITRC that the IRS is engaging in a serious campaign to reduce identity theft related fraud and provide needed support to victims.

The full testimony can be found here: http://waysandmeans.house.gov/Calendar/EventSingle.aspx?EventID=293593

‘What the IRS is Doing About Tax Fraud’ was written by Rex Davis. Rex is the Director of Operations at the Identity Theft Resource Center.