In the run up to Tax Day 2015, myriad stories surfaced again about the various scams and practices thieves use to commit tax fraud. TurboTax, for instance, reports processing quite a few bogus state income tax returns, and there is also the recent tactic of imposters “from the IRS” calling from a Washington, D.C. area code and threatening victims with imminent arrest for an overdue tax penalty—unless the victim pays the penalty via wire transfer or pre-paid debit card. Alternatively, PII and other sensitive information are requested to claim a bogus tax refund. (As a general reminder, the IRS procedures for resolving tax problems include contacting you by mail first and allowing you to appeal.) As the world conducts more and more of its business on the Internet—including paying our dues to Uncle Sam—fraud and identity theft follow.
But have no fear: your United States Congress is on the way!
We leave it to you to interpret that last sentence as a joke or not. But while congressional action may be a laughing matter, tax fraud is not.
With that in mind, here is a brief overview of the bills that have been introduced in Washington to combat tax-related fraud and identity theft:
- Section 334 of the Senate’s Budget Resolution gives lawmakers permission to legislation that would change IRS processes on taxpayer notification of scams or how the IRS determines if one is a victim of them. The House Budget Resolution did not include this language, so it will have to survive negotiations between the House and Senate on a final budget resolution.
- The dashingly named “A bill to require the Secretary of the Treasury to implement security measures in the electronic tax return filing process to prevent tax refund fraud from being perpetrated with electronic identity theft” offered by Sen. Rubio and Rep. Yoho (both of Florida), would require the Secretary of the Treasury to implement measures such as security questions to verify one’s identity before taxpayers can submit a tax return electronically. It does not appear to apply to tax returns submitted by mail.
- The Identity Theft and Tax Fraud Prevention Act of 2015 from Sen. Nelson (also of Florida) has more moving parts, but to distill it to its essence, the bill would:
- Require the Treasury Department to reduce the timeframe for resolving tax-related identity theft, give affected taxpayers a single point of contact at the IRS, and develop processes to prevent multiple and fraudulent tax returns.
- Reduce the prevalence of Social Security numbers in the system by reducing their collection and use for Medicare and explore more secure Medicare ID card technologies. The passage of the Medicare Access and CHIP Reauthorization Act of 2015 sets aside money for Medicare to issue new Medicare ID cards that do not use Social Security Numbers.
- Stand up criminal penalties for the use, display or sale of Social Security numbers without consent, misappropriating someone else’s taxpayer identity, and tax preparers’ unauthorized disclosure or failure to verify taxpayer identity before preparing a return or issuing a refund.
- The Tax Return Preparer Accountability Act of 2015 would also strengthen regulations of tax return preparers that are not already regulated under existing laws and enacts a $1,000 penalty per tax return for those who do not comply.
- The Education Tax Fraud Prevention Act [/link], from Sen. Vitter of Louisiana, goes against the grain by requiring those who claim the Hope Scholarship or Lifetime Learning tax credit to use their social security numbers instead of taxpayer identification numbers.
None of these provisions—save the Social Security numbers being removed from Medicare ID cards—have passed out of any chamber yet, and it’s Congress, so anything could happen—or not happen. But we will be watching to see if any of these gain traction in the months ahead.