The Checkout

Where's the Refund?

Annys Shin

It's tax time, and here's one figure that might startle you: The number of thieves who have gotten refunds by using another person's Social Security number increased 579 percent from 2002 to 2007, according to a report from the Treasury Inspector General for Tax Administration, a government watchdog.

The report, which was released this week, also found that the theft of taxpayers' names and Social Security numbers to get work, then not pay federal taxes on the wages, is also on the rise. In those cases, the thieves take off with the wages while the lawful taxpayer is left with the IRS believing he or she did not report all of his or her income. The number of complaints of this type of fraud has more than doubled, the report noted.

In 2007 alone, the Federal Trade Commission received 56,125 complaints of identity theft involving either the filing of a fraudulent tax return or the use of someone else's identity to get a job, the report noted.
"Clearly, identity theft is a growing national problem that affects both taxpayers and tax administration," TIGTA's Inspector General J. Russell George said.

The report took the IRS to task for not doing enough to stem the problem. Identity theft related to tax administration is rarely recommended for prosecution, the report said. And if a taxpayer's name and Social Security number are misused, the IRS does not notify employers.

"The IRS has placed only limited emphasis on employment-related and tax fraud identity theft," George said. "The IRS's policy is that identity theft will only be investigated if it is committed in conjunction with other criminal offenses having a large tax impact."

In a response attached to the report, the IRS agreed that it could do more but said it has in recent years devoted more resources to combating identity theft. The agency said it is also limited in some ways.

For one thing, the agency said it relies on the Federal Trade Commission's Identity Theft Data Clearinghouse for information about such cases, but that there often are not enough details or personal information to support a prosecution.

The agency also said it cannot notify employers when wage information is not accurate on a tax return because it is illegal for the IRS to share taxpayer or tax return information with a third party.

Congress has taken note, holding a hearing on the topic this week. This is an issue that is surely not going to go away anytime soon.
--Nancy Trejos

By Annys Shin |  April 11, 2008; 8:00 AM ET Nancy Trejos
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Comments

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"The agency also said it cannot notify employers when wage information is not accurate on a tax return because it is illegal for the IRS to share taxpayer or tax return information with a third party."

This has to be a joke. The employer is already involved as a third party when they issue a W-2 with the wage, taxes witheld, and SSN. Why and how could it be illegal for the IRS to inform the issuer of the W-2 that their information is incorrect?

Posted by: annapolis | April 14, 2008 11:08 AM

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