Victim of a Tax Related Identity Thief?
Tax Related Identity Thief with the IRS
PinOn May 16, a bipartisan bill was passed by the House of Representatives, HR 3832, in an attempt to deter a tax related identity thief. The bill provides for several new defensive programs and measures that will hopefully impede efforts by identity thieves.
Following is a brief outline of the bill:
- An office within the IRS will be created as a contact point for victims of identity thieves.
- It amends the tax code to require any form that is related to employee wages, such as W-2’s, and includes payment of wages classified as group term life insurance. Also included are payments made to individuals on Form 1099-MISC for non-employee compensation, block 7. All filers of these forms will be required to file them on or before February 15.
- The U.S. Treasury Department will be required to advise taxpayers of any unauthorized use of their identity as well as any criminal charges associated to that activity.
- In lieu of a social security number, a taxpayer identification number will be required on W-2 statements.
- An Identity thief will be subject to criminal penalties instead of civil charges.
- The Social Security Act will be amended to give the IRS direct access to all information contained in the National Directory of New Hires. This will help the IRS to identify and reduce the number of fraudulent tax return filings with claims for refunds.
- It will require the IRS to create a special liaison with local law enforcement agencies within its own Criminal Investigation Division. Any tax related identity thief issue by the states and local law enforcement will have this liaison as their primary contact source. The duties of this special liaison restrict any information shared with law enforcement to be used only for identity theft prosecution, and cannot be re-disclosed to third parties.
Congressman, Jim Renacchi stated in a prepared statement, that “Tax related identity theft is an evolving criminal activity that can happen to anyone. In fact, last tax season my identity was stolen and used to file a fraudulent tax return. Northeast Ohioans and taxpayers throughout the country deserve to have their hard earned dollars shielded from thieves. That is why I am so pleased to see the House take this important first step to better safeguard taxpayer dollars and reduce the hardships caused by this criminal activity. I look forward to working with my Senate colleagues to ensure this bill is signed into law.”
If this bill should become law, it will require the secretary of the Treasury to present a feasibility study to the Senate Finance Committee and also to the House Ways and Means Committee, within 180 days of enactment. This study will define a program whereby taxpayers who filed tax related identity theft affidavits, will have the ability to prevent their federal tax return from being processed electronically by anyone, including the taxpayer. The secretary must also state if implementation of the program is recommended.
The secretary of the Treasury is instructed to utilize information contained in the Do Not Pay Initiative in Section Five of the Improper Payments Elimination and Recovery Improvement Act of 2012 that relates to prevention of fraudulent tax refunds.
If the bill becomes law, the Treasury Inspector General for Tax Administration, in conjunction with the Federal Trade Commission and the FCC, within one year of enactment, is to submit a report to Congress. This report will contain information about tax related identity theft telephone scams whereby thieves attempt to acquire taxpayer’s personal information by posing as IRS agents calling on behalf of the IRS.
I believe that this bill is a first step with good intentions, however, with the feasibility study and other programs to create, a lot of time is going to pass, and a lot of taxpayer money will go out the door to thieves. The IRS has already made a change for the upcoming tax season regarding item 2. For the 2016 tax year, employers and other payers of compensation are required to submit W-2’s and 1099-MISC by January 31, ( Two weeks earlier that the bill requires) This will still give an identity thief almost a month to steal taxpayer money.
I have a better solution. Have all W-2’s and 1099-MISC forms for non-employee compensation filed by January 31. Tax season begins on March 1 and ends on June 15, and no refunds can be issued without IRS matching of any tax document.
The taxpayer identification number is a good idea but for it to be effective, must be used universally, not just with the IRS.
As for making tax related identity theft a criminal act, I agree. Punishment should be a mandatory 20 year sentence, with no possibility of parole.
There is one item that I neglected to mention above when listing the provisions of this proposed bill. There is no funding provided in this bill to carry out any of the programs. Does anyone remember what happened when the IRS requested additional budget funding to enforce the ACA? Efforts were re-focused and telephones weren’t answered and/or placed on hold for hours. Any comments on what to expect here if no additional funding is provided to handle a tax related identity thief claim?
Gust Lenglet is the CEO of HBS Financial Group, Ltd., an accounting & tax preparation firm in Maryland. He has more than 25 years of experience in the banking and financial industry. Gust started his career as a loan officer at a major national bank, and then moved on to become controller of a major law firm. In recent years, he has written many financial articles that have been published on Ezine Articles and many websites.
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