Congress has also taken measures to stop identity theft by passing sterner laws to punish these criminals. The penalties for being caught stealing other people’s identities have been increased. But how effective such increased penalties will be remains to be seen. Chances are they will not have much effect in reducing the crime in the immediate or near future.
While the efforts of the IRS are laudable, it is worth noting that according to a report by the Treasury Inspector General for Tax Administration (TIGTA), an additional 1.5 million fraudulent returns, amounting to more than $5.2 billion in fraudulent refunds slipped through the cracks and the identity thieves got away scot free.
Commenting on this matter, Ms. Olson said, “organized and not-so-organized criminals have sought to profit off the tax system by submitting bogus refund claims and often by stealing and utilizing the identity of another taxpayer. Each year, the IRS’s task in identifying these claims has become more challenging, with the inevitable result that some fraudulent claims are never identified and many legitimate claims are mistakenly held up, imposing significant burden on honest taxpayers.”
Often identity thieves submit multiple fraudulent tax returns through e-filing, using someone else’s name and Social Security number (SSN) and they do so early, most times earlier than the legitimate taxpayer himself or herself. When the real taxpayer submits his or her return, the IRS would reject the submission because the agency had already received a submission under that person’s name and SSN. By the time this takes place, the criminal would have already received the tax refund deposited into his or her bank account electronically by the IRS.
Having their budget cut by Congress does not help the IRS combat identity theft at all. This year’s IRS budget was reduced by about $300 million. Despite this, the IRS has reported that they have identified 2.6 million fraudulent refund claims this year, many arising from identity theft. This was due to an increasing the number of personnel focusing on identity theft, distributing PINs to prior victims, and technological improvements. But the reverse side of this is that the increased scrutiny has resulted in delays in refund claim processing.
So maybe the better thing to do to empower the IRS in combatting identity theft would be to increase the agency’s budget and thereby allow them to put in more personnel and effort into fighting this crime.