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The United States Government Accountability Office (GAO) has issued a report titled ‘TAXES AND IDENTITY THEFT – Status of IRS Initiatives to Help Victimized Taxpayers’ that reveals a huge jump in the number of tax-related identity theft incidents identified by Internal Revenue Service (IRS). Primarily refund or employment fraud attempts, the IRS identified 248,357 tax-related identity theft incidents in 2010, nearly five times the amount of such incidents reported in 2008.
The GAO report released in May 2011 – which includes testimony before the Subcommittee on Fiscal Responsibility and Economic Growth, Committee on Finance, U.S. Senate – found that identity theft harms innocent taxpayers through employment and refund fraud and that both the IRS and taxpayers may not discover refund or employment fraud until after legitimate tax returns are filed.
The GAO report also showed that the number of tax-related identity theft incidents identified by IRS such as refund or employment fraud has grown rapidly in the past three years:
- 51,702 tax-related identity theft incidents in 2008.
- 169,087 tax-related identity theft incidents in 2009.
- 248,357 tax-related identity theft incidents in 2010.
In refund fraud, an identity thief uses a taxpayer’s name and Social Security Number (SSN) to file for a tax refund, which IRS discovers after the legitimate taxpayer files. Refund fraud delays the refunds of innocent taxpayers.
In employment fraud, an identity thief uses a taxpayer’s name and SSN to obtain a job. When the thief’s employer reports income to IRS, the taxpayer appears to have unreported income on his or her return. Employment fraud exposes innocent taxpayers to enforcement actions for unreported income.
The GAO report indicates the IRS has taken multiple steps to resolve, detect, and prevent tax-related identity theft incidents such as employment and refund fraud:
- Resolve—IRS marks taxpayer accounts to alert its personnel of a taxpayer’s identity theft. The purpose is to expedite resolution of existing problems and alert personnel to potential future account problems.
- Detect—IRS screens tax returns filed in the names of known refund and employment fraud victims.
- Prevent—IRS provides taxpayers with information to increase their awareness of identity theft, including tips for safeguarding personal information. IRS has also started providing identity theft victims with a personal identification number to help identify legitimate returns.
However, the GAO report also found that the IRS’s ability to address tax-related identity theft incidents is constrained by:
- Privacy laws that limit IRS’s ability to share identity theft information with other agencies.
- The timing of fraud detection—more than a year may have passed since the original fraud occurred.
- The resources necessary to pursue the large volume of potential criminal refund and employment fraud cases.
- The burden that stricter screening would likely cause taxpayers and employers since more legitimate returns would fail such screening.
The U.S. Government Accountability Office (GAO) – known as “the investigative arm of Congress” and “the congressional watchdog” – helps improve the performance and accountability of the federal government for the benefit of the American people. For more information, visit: http://www.gao.gov/.
About Employment Screening Resources (ESR): Founded in 1997 in the San Francisco area with a mission to help employers and employees maintain safe workplaces, Employment Screening Resources (ESR) is accredited by The National Association of Professional Background Screeners (NAPBS®) and provides industry leading technology, legal compliance, service, turnaround, and accuracy. ESR also wrote the book on background checks with ‘The Safe Hiring Manual’ by founder and President Lester Rosen. For more information about ESR, visit https://www.esrcheck.com.
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