Kerri Tassin, J.D., CPA
Thieves who steal personal identification information and then use the information to file fraudulent tax returns continue to harass taxpayers and tax administration processes alike. According to the “Interim Results of the 2015 Filing Season” report issued by the treasury inspector general for tax administration on March 31, 2015, as of March 7, 2015 the Internal Revenue Service reported that it had detected 36,674 tax returns which claimed $172.9 million in fraudulent refunds. The IRS also reported that it stopped approximately 77 percent of those refunds from being issued.
Later, in May 2015, news services reported that hackers had accessed Internal Revenue Service databases and obtained tax information on over 100,000 United States taxpayers. A May 26 New York Times article titled “Cyberattack Exposes I.R.S. Tax Returns” reported that the IRS had sent out $50 million in refunds based upon the filing of fraudulent tax returns during the 2015 filing season before the IRS became aware of the problem. According to the report, the perpetrators used taxpayer identification information obtained from outside sources to gain access to taxpayers’ prior year tax information on the Internal Revenue Service’s online Get Transcript service.
On June 2, IRS Commissioner John Koskinen testified concerning the data breach during a hearing of the Senate Finance Committee. In his written testimony, available on IRS.gov, Commissioner Koskinen discussed the increasing problem surrounding the use of personal identification information gathered from outside sources to file fraudulent tax returns. According to the commissioner, suspicious attempts to gain tax information on the Get Transcript service resulted in the filing of about 13,000 suspicious tax returns, with a total of about $39 million in tax refunds.
The Federal Trade Commission also reported a sharp increase in tax fraud complaints from consumers during 2014. According to a Jan. 26 news release issued by the FTC, in 2014 the FTC received nearly 24 times the number of complaints regarding criminals impersonating IRS officials than it received in 2013. And tax identity theft accounted for 32.8 percent of all identity theft complaints to the FTC in 2014.
Obviously identity theft and use of personal identifying information to file fraudulent tax returns continue to be significant problems as perpetrators find new ways to take advantage of the system. In his written testimony at the June 2 Senate Finance Committee hearing, J. Russell George, treasury inspector general for tax administration, stated that security of taxpayer data remained the top concern facing the IRS since Fiscal Year 2011. George pointed to “…the increased number and sophistication of threats to taxpayer information…”. He also mentioned the need for the IRS to improve its enterprise security program.
What should taxpayers do if they believe their personal identification information has been used to file a fraudulent tax return? The IRS provides information on its website, IRS.gov. Publication 5027 is a single-page document which provides action steps for victims of identity theft. The publication instructs taxpayers to file a police report, file a complaint with the Federal Trade Commission, and contact the three major credit reporting bureaus. The publication also directs taxpayers to respond immediately to IRS notices, file an Identity Theft Affidavit, and continue to file tax returns and pay taxes. Taxpayers need to act quickly to protect themselves from further fraudulent use of their personal identification information.
The material in this article is for informational purposes only and does not constitute written tax or legal advice. Please consult with your own tax adviser regarding your personal tax situation.
This article appeared in the July 31 issue of the Springfield News-Leader and can be accessed online here.
Kerri Tassin, J.D., CPA, is director of the master of accountancy program in the School of Accountancy at Missouri State University. Tassin also is the director of the Volunteer Income Tax Assistance program and the director of the Low Income Tax Clinic at MSU. Email: email@example.com.