Casey Calls for Creation of Multi-Agency Task Force to Fight Tax Fraud Tied to Identity Theft

Identity Theft Related Tax Fraud Doubled from 2010 to 2011- Cost Taxpayers $5.2 Billion

Proposal Could Aid Berks County Where Law Enforcement Has Fought to Combat Problem And Municipalities Across Commonwealth  

Washington DC - Today, U.S. Senator Bob Casey (D-PA) called for the creation of a multi-agency federal task force that would combat tax fraud tied to identity theft. The coordinated federal effort could aid Berks County where law enforcement has aggressively fought tax fraud as well as municipalities across the Commonwealth.

“Tax fraud linked to identity theft is a major issue for law enforcement across the state,” Senator Casey said. “A coordinated federal effort is the best way to bolster the work that is underway in Berks County and other municipalities. I’m hopeful that with tax day approaching the Justice Department, the IRS and the Social Security Administration will take this opportunity to increase their efforts on tax fraud.”

“I appreciate Senator Casey's attention to this very serious matter,” said Berks County District Attorney John T. Adams. “We believe that the IRS must institute a multifaceted approach to this problem.  First, the IRS must immediately increase their enforcement initiatives to stop this problem. Secondly, the IRS needs to enact controls that would require verification of W2’s and Social Security numbers before refunds are sent to the thieves who are perpetrating this fraud on the Federal Government. 

On November 29, 2012, a Government Accountability Office (GAO) report pointed to over 600,000 incidents of tax fraud related to identity theft in 2011, more than double the previous year.  More troubling, the report suggests that this finding represents only a fraction of the overall fraud perpetrated against taxpayers.  In July 2012 the Treasury Inspector General for Tax Administration found 1.5 million tax returns with potentially fraudulent refunds in 2011, representing $5.2 billion in losses to the Treasury.  The Inspector General further pointed to a growing problem, estimating $21 billion in fraudulent refunds over the next five years. 

The full text of Casey’s letter can be seen below:

The Honorable Eric H. Holder
Attorney General

The Honorable Michael J. Astrue
Commissioner of Social Security

The Honorable Douglas H. Shulman
Commissioner of Internal Revenue

Dear Mr. Attorney General, Commissioner Astrue and Commissioner Shulman:

I write to you today to express my serious concerns about the increasing occurrence of tax fraud resulting from identity theft. 

On November 29, 2012, a Government Accountability Office (GAO) report pointed to over 600,000 incidents of tax fraud related to identity theft in 2011, more than double the previous year.  More troubling, the report suggests that this finding represents only a fraction of the overall fraud perpetrated against taxpayers.  In July 2012 the Treasury Inspector General for Tax Administration found 1.5 million tax returns with potentially fraudulent refunds in 2011, representing $5.2 billion in losses to the Treasury.  The Inspector General further pointed to a growing problem, estimating $21 billion in fraudulent refunds over the next five years. 

I have heard first hand of this issue in Pennsylvania.  In Berks County, the District Attorney, John Adams, has called tax fraud “the single most profitable” crime in his jurisdiction.  He has written that much of the identity theft tax fraud in his region is perpetrated by organized criminal groups. These groups have turned their efforts from other crimes, such as drug trafficking, to focus on tax fraud, which is easier and is less likely to result in serious criminal penalties.  His message to the federal government is clear—give him and other prosecutors the tools necessary to crack down on these crimes. 

In response, I have looked into the federal government’s a role in cracking down on identity theft.  In conversations with each of your agencies, I understand that you have begun to take steps to prevent this fraud.  Examples of these efforts include:

  • The Department of Justice creating expedited review procedures for stolen identity refund fraud cases, and issuing a directive allowing local U.S. Attorneys’ Offices to begin prosecution of these cases without prior authorization.
  • The Social Security Administration reducing the amount of information in its Death Master File releases.
  • The IRS creating filters to search tax returns for indicators of fraud.
  • The IRS working with victims of identity theft to help them recover stolen refunds and prevent future fraud based on their identity. 

While these efforts are a good start towards addressing identity theft tax fraud, large holes remain that allow this fraud to continue. It is clear a more comprehensive approach is needed.  Identity theft tax fraud is a multi-faceted problem, requiring active cooperation between your agencies.  It is my understanding that there have been some ad hoc cooperative efforts, however I believe that a dedicated, ongoing taskforce is needed.  Such a taskforce would allow your agencies to better share information and make the best use of limited resources.

Preventing this fraud will require a combined response from your agencies in consultation and cooperation with local officials and law enforcement.  In order to properly coordinate this response, I ask that you create a multi-agency taskforce aimed at eliminating identity theft tax fraud.  I ask that you each name representatives to this taskforce, so that it can begin its work as soon as possible.  This taskforce should regularly report to Congress on efforts—both by individual agencies and cooperatively— to combat identity theft tax fraud.  The taskforce should also seek input from your agencies, their respective Inspectors General and local law enforcement in order to make recommendations on combating this fraud.  Congress will also have a role to play in eliminating this fraud, and the taskforce will be well-placed to recommend legislative changes

Identity theft tax fraud has created serious problems for victims whose identities have been stolen, and has cost taxpayers billions of dollars at a time when our Nation is facing serious fiscal challenges.  I look forward to working with you to prevent this fraud.

Thank you for your attention to this request.

Sincerely,

Robert P. Casey, Jr.

United States Senator

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