Mr. President, this is the first day in which Americans across the country are eligible to file their 2018 tax returns. I rise today to introduce with my colleague from Alabama, Senator Jones, the…
Mr. President, this is the first day in which Americans across the country are eligible to file their 2018 tax returns. I rise today to introduce with my colleague from Alabama, Senator Jones, the Taxpayer Identity Protection Act. Our bill seeks to help prevent American taxpayers, including our seniors, from falling victim to identity theft and tax refund fraud.
Last year, the IRS received nearly 142 million individual income tax returns. Nearly 75 percent of these returns were eligible for refunds. For the most part, these refunds are the return of dollars belonging to taxpayers that were overwithheld from their paychecks in the prior year. Millions of American families eagerly await these tax refunds-- money they may need to pay off debts, settle medical bills, or plug gaps in the family budget.
Unfortunately for some Americans, these refunds never come or are long delayed due to identity theft. Criminals have figured out that, in many instances, it is cheaper and easier for
them to steal taxpayers' identities and hijack their tax refunds than it is to traffic in drugs or rob banks.
Identity theft-refund fraud occurs when a criminal files a false tax return using a stolen Social Security number and other sensitive personal information from sources such as hospitals, schools, or assisted living facilities, sometimes by recruiting employees to steal that personal information. The fraudster then uses the data to prepare fraudulent tax returns. The thieves make sure to file early--as soon as the tax season opens in January--to increase their odds that they can get a tax refund before the real taxpayer who is entitled to the refund files his or her return.
The criminals are known to hold what they call make it rain parties, where they bring stolen laptops to a motel room with internet access and work together churning out scores of these fake tax returns. These criminals work under the premise of ``file early, file often.'' Once the thieves file the fraudulent tax return, the IRS processes it and issues the tax refund. With each refund worth on average $2,778, the money can add up pretty quickly for these criminals.
This is by no means a victimless crime. In 2017, the Federal Trade Commission received more than 371,000 complaints of identity theft, including 82,000 complaints related to employment or tax refund fraud. Taxpayers who have their refunds hijacked by fraudsters often have to wait for years to get everything straightened out and to get the refunds to which they are legally entitled. Many, sadly, are revictimized year after year. A substantial number become victims of other forms of identity theft.
Worst of all, victims are often the most vulnerable. The inspector general estimates that 76,000 very low income senior citizens were victims of tax fraud-identity theft in the year 2010 alone.
In 2016, the Lewiston, ME, Sun Journal published a story about Rick Zaccaro and Bonnie Washuk, a married couple who were the victims of tax fraud. They had filed their taxes in late January of 2015, and Rick, a retired financial analyst for the Postal Service, was checking the status of their return online in early February. That is when he learned they were the victims of identity theft. Someone had filed a tax return and claimed a tax refund using their names, dates of birth, and Social Security numbers. That fraudulent claim was paid by the IRS while their legitimate tax filing, with their appropriate W-2s, was stuck in limbo.
It took months of worrying, frozen bank accounts, and many calls to multiple government offices for this couple to straighten things out. When they finally received their overdue tax refund, they also received something called an identity protection personal identification number, better known as an IP PIN.
To provide relief to some victims of identity theft, the IRS began issuing IP PINs to eligible taxpayers in fiscal year 2011. An IP PIN is a six-digit number assigned to eligible taxpayers that allows tax returns and refunds to be processed without delay and helps prevent the misuse of an individual's Social Security number on fraudulent income tax returns.
Here is how it works. If a return is filed electronically with an individual's Social Security number and an incorrect or missing IP PIN, the IRS's system automatically rejects that tax return until it is submitted with the correct IP PIN or it is filed on paper. If the same conditions occur on a paper-filed return, the IRS will delay its processing and any refund that may be due while the Agency determines if the return actually belongs to the taxpayer.
In 2013, the IRS began a pilot program in which it offered IP PINs to all taxpayers--not just those who were victims of identity theft--who filed their Federal tax returns as residents of Florida, Georgia, or the District of Columbia. According to the IRS, these three locations were chosen because they have the highest per capita percentage of tax- related identity theft in the country. Taxpayers in these three jurisdictions may opt in to the IP PIN program if they want that extra layer of identity protection, even if they have not been victims of identity theft.
In preparation for last year's filing season, the IRS issued nearly 3.5 million IP PINs to taxpayers. That is a substantial increase from the 770,000 in 2013. According to the IRS, within just a month, it had rejected nearly 7,400 fraudulent tax returns that had been filed electronically. As of March 15, 2018, it had stopped nearly 1,500 paper-filed tax returns. This shows that this system works.
If a taxpayer has a special PIN number that has to appear on his or her or their tax return before the IRS will process the form electronically and issue the refund, it will stop a criminal, who would not have access to that special, individualized PIN number, from receiving someone else's tax refund.
The bipartisan Taxpayer Identity Protection Act of 2019 that the Senator from Alabama and I are introducing today would expand and make permanent the IRS's IP PIN pilot program to help combat identity theft- refund fraud across the Nation. Specifically, our bill would authorize the IRS to expand its pilot program nationally in phases over a 5-year period. Expanding the program would give all taxpayers, ultimately, the opportunity to further protect themselves from falling victim to tax refund fraud and identity theft while also saving taxpayers billions of dollars every year in tax refunds that are paid not to the taxpayers who deserve them but, rather, to criminals who are impersonating the taxpayers who deserve the refund.
Having an IP PIN has proven to protect against identity theft. I am pleased to report that the IRS supports expansion of this vital program over the next 5 years.
I urge my colleagues on both sides of the aisle to support the adoption of the Taxpayer Identity Protection Act of 2019. This is a concrete action we can take to help protect taxpayers and to ensure that tax refunds go to the taxpayers who deserve these refunds, who are entitled to these refunds, and that they don't get misdirected to a criminal who is seeking to rip off a taxpayer.
