ShareThisWASHINGTON - Congress wants to crack down on identity thieves who steal other people's tax refunds by submitting false returns to the IRS.
As reports of tax-related identity theft skyrocket, Sen. Bill Nelson, D-Fla., called on the IRS Wednesday to tighten safeguards against the crime and better assist victims who must wait months -- sometimes years -- to get their rightful refunds after the scam is detected.
At a hearing Wednesday of the Senate Finance Subcommittee on Fiscal Responsibility, which he heads, Nelson said he wants to thwart the surge in the crime.
In 2010, the IRS identified 248,357 stolen tax refund ID theft cases -- more than in the previous two years combined (220,789), according to the U.S. Government Accountability Office, the investigative arm of Congress.
The widespread use of Social Security Numbers has made it easy for crooks to submit false tax returns and steal the refunds, Nelson said. "The keys to the tax system have been copied many times over," he said. "It should come as no surprise, then, when our tax system is bombarded with sham tax returns."
A Scripps Howard News Service investigation in February detailed how thieves -- under the radar screen of law enforcement or the IRS -- have flocked to the crime.
Scripps reported that complaints to federal authorities of those ID crimes more than tripled from 2005 to 2009. The spike comes as other forms of ID theft have been declining, thanks in large part to vigilance by credit card companies.
The IRS says it is tackling the growing volume of fake returns, and, as of May 12, had detected 145,537 bogus 2010 returns out of nearly 200,000 it had red-flagged for inquiry.
But victims say their problems are compounded by how the IRS handles the cases. They say dealing with the IRS is confusing, and that the agency provides little help in untangling them from the mess and getting them their rightful refunds.
The IRS continues "to treat me as if I am the one to blame," said Sharon Hawa, of Bronx, N.Y., who has lost her refund to a crook twice.
After Hawa learned in early 2009 that her tax return had been rejected -- someone had already filed a 2008 return in her name -- it took the IRS 16 months to issue Hawa's rightful $6,604 federal refund.
This year, Hawa lost her 2010 federal and state refunds totaling $6,335 to ID thieves.
"Unfortunately, the IRS seemed more disorganized this year than the first year it happened to me," she said. Hawa is still waiting for her 2010 federal refund.
Each time she contacts the IRS, she must deal with someone new. "It's just the same conversation over and over again," Hawa said.
The IRS contends it is vigilant, and detects -- and prevents -- more fraud than not. Beth Tucker, IRS deputy commissioner, said at the hearing that the IRS has kept $929 million in tax refunds from going to ID thieves since 2009.
Even so, she said the IRS estimates it pays out $15 million each year into the hands of ID thieves.
But National Taxpayer Advocate Nina Olson -- head of the independent IRS consumer watchdog office -- cast doubt on the IRS figures, saying that there are no accurate estimates for how much the crime costs taxpayers.
"They don't believe their own numbers," she said after the hearing. Olson's office, which helps the public deal with the IRS, has received 60 percent more ID theft cases this year than in the same period in 2010.
One way the IRS might prevent ID theft is by giving secret PIN numbers to defrauded taxpayers, Tucker said.
ID theft victims would receive the secret number to include with their tax return as a way to thwart the crooks, who likely would lack the PIN code.
Another way is to screen more returns, hunting for factors that may red-flag ID theft. Tucker said the screening program is improving dramatically.
(E-mail reporter Isaac Wolf at wolfi(at)shns.com)
(Distributed by Scripps Howard News Service, http://www.scrippsnews.com)
