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Fighting Tax Fraud and Identity Theft

April 12, 2013

The IRS’ Acting Commissioner Steven Miller said that since the start of 2013, the IRS has worked with victims of identity theft to resolve more than 200,000 identity theft cases. He also said that the IRS has expanded their Identity Protection PIN program to protect victims of identity theft from victimization in the future. The IRS has issued more than 770,000 Identity Protection PINs this tax season to victims of identity theft.

With identity theft topping the IRS’ Dirty Dozen list yet again, the IRS is taking aggressive steps to fight it. According to reports, the agency stopped more than five million suspicious tax returns in 2012, and prevented $14 billion in tax refunds from falling into the hands of tax scammers in 2011. Since October 2012, the IRS has opened more than 670 criminal identity theft investigations throughout the country.

Along with the IRS, individual states are also planning to introduce several proposals to tackle the increase of identity theft and tax refund fraud. President Obama’s newest budget is expected to establish a civil penalty of $5,000 for those who file tax returns using another person’s identity. Along with the monetary penalty, stiffer criminal penalties for identity theft may be introduced.

To curb identity theft where the identity of the recently deceased is used to file false tax returns, President Obama may propose making it difficult to access the Social Security records of the deceased.

The new budget will suggest changes in how employers file their employees’ tax returns. W-2 forms that employers file on behalf of their employees may not list the employee’s Social Security Number (SSN), but a unique identification number instead. This will help employees keep their SSN more secure.

The country loses billions in revenue due to tax fraud every year. President Obama’s initiative and the IRS’ enforcement actions can help bring down this tax crime that victimizes thousands of taxpayers each year.

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