Identity theft-related tax fraud topped the most recent Internal Revenue Service (IRS) list of common tax schemes they call the “Dirty Dozen”. And the problem isn’t getting better. The U.S. Federal Trade Commission (FTC) reported 490,000 identity theft complaints in 2015, a 47% increase over 2014. The FTC noted that the biggest contributor to that spike was tax refund fraud with FTC Chairwoman Edith Ramirez calling tax refund fraud “the largest and fastest growing ID theft category” tracked by the agency.
To combat identity theft-related tax fraud, Rep. Jim Renacci (R-OH) introduced H.R. 3832, or the Stolen Identity Refund Fraud Prevention Act of 2016. The bill, which was co-sponsored by Rep. John Lewis (D-GA), Ranking Member on the Ways and Means Subcommittee on Oversight, passed the House on May 15, 2016.
The bill includes provisions to:
- Establish a centralized point of contact at IRS for ID theft victims;
- Improve taxpayer notification of suspected ID theft;
- Require the IRS to submit a study on the feasibility of establishing a program for victims of identity theft-related tax fraud to opt out of electronic filing; and
- Establish an Information Sharing and Analysis Center (ISAC) to collect, analyze, and share actionable data and information to detect and prevent identity theft.
The bill previously included a provision that would require a form W-2 to be filed with the taxpayers and with the Social Security Administration (remember, forms W-2 get mailed to SSA, not IRS) by January 31. That provision was included in the extenders bill and is effective for the 2016 tax year (downloads as a pdf). The original bill had also addressed the easy availability of Social Security numbers: employers may now truncate Social Security numbers printed on forms W-2; previously, Social Security numbers could be truncated for forms 1099.
The bill now moves onto the Senate.
Identity theft is a personal issue for Rep. Renacci: he was also a victim of identity theft. According to Rep. Renacci, “This past tax season, someone used my stolen personal information and filed a fraudulent tax return in my name, claiming a refund. I didn’t learn about this fraud until I received an IRS notice questioning a return I had filed—even though I had not yet even filed.” He continued, “I have heard of many similar stories from Northeast Ohio taxpayers who also were victims of identity theft-related tax fraud. Congress and the IRS must work together with industry to better shield taxpayer dollars from thieves and reduce the hardships caused by this increasing criminal activity.”
You can hear more about Rep. Renacci’s story – and the bill – here:
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If you believe someone may have used your SSN fraudulently to file taxes, notify the IRS immediately. If the IRS contacts you about a potential identity theft issue, respond immediately by calling the number provided or, if instructed, go to IDVerify.irs.gov. You may also need to complete federal form 14039, Identity Theft Affidavit.
If you have previously been in contact with the IRS about an identity theft problem, and it has not yet been resolved, call the IRS Identity Protection Specialized Unit, toll-free, at 1.800.908.4490. If you aren’t sure that your identity has been compromised but you have reason to believe that you are at risk because you’ve lost your wallet or have questionable credit card activity, you’ll also want to contact the IRS Identity Protection Specialized Unit (same number: 1.800.908.4490).
For information on how to protect yourself from identity theft, click here.
