Identity Theft Tax Problem

Finance Chairman Baucus wants more action and details on IRS strategy to combat identity fraud [Press release dated Aug. 5]:

A recent IRS update on its Identity Protection Strategy has failed to satisfy the concerns of Sen. Max Baucus (D-MT), chairman of the Senate Finance Committee.

The report, submitted to Baucus on July 21 by IRS Commissioner Douglas Shulman, was provided in response to a request the senator made at a committee hearing held in April. It summarized IRS’s efforts in three areas: assistance to taxpayers in resolving tax issues associated with identity theft; outreach to increase taxpayer awareness of identity theft; and prevention of identity theft by building programs to address the problem.

According to IRS, identity theft can have a negative effect on a taxpayer’s tax account in one of two ways–a taxpayer’s identity could be used to obtain a fraudulent tax refund and the stolen information could be used to obtain employment. “Identity theft is a growing and serious issue that victimizes too many Americans,” Baucus said. “And while this report is full of good intentions, its actual treatment of the problem is tepid and insufficient.”

The most notable improvement to IRS processes contained in the report, Baucus said, was that taxpayers will be able to preemptively “self-report” to the agency when their identities have been stolen. However, he added that he wants IRS to give him “clear, substantive answers on their strategic plan, and its implementation, to treat and resolve cases of identity theft.”

Baucus outlined a number of concerns with the IRS strategy, including the following: lack of clarity regarding specific goals, measures and timetables; uncertainty regarding when the agency will be able to prevent recurring holds on taxpayer accounts; insufficient details to determine whether there will be a central point of accountability at IRS; and absence of information addressing whether the agency will contact taxpayers when someone files a tax return using their Social Security number.

“I intend to follow up with Commissioner Shulman to make certain that my expectations are clear,” Baucus stressed. The Baucus press release and Shulman’s letter with the accompanying report can be found at http://finance.senate.gov/press/Bpress/2008press/prb080508.pdf

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