By Sen. Susan M.
Collins
In
January 2015, Rick Zaccaro and Bonnie Washuk, a married couple here in Maine,
filed their federal income taxes. Rick, a retired financial analyst for
the Postal Service, checked the status of their return online in early February
and learned that they were the victims of identity theft. Someone had filed 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 the refund they were due, was stuck in limbo.
It took months of worrying,
frozen bank accounts, and many calls to multiple government offices for the
couple to straighten things out. When they finally did receive their overdue
tax refund from the IRS, they also received something called an Identity
Protection Personal Identification Number – better known as an IP PIN.
Last
year, Americans submitted nearly 142 million individual tax returns to the IRS,
of which about 75 percent were eligible for a refund. With the arrival of
tax season, criminals will once again use this opportunity to begin filing
fraudulent tax returns in an attempt to steal the refunds that are due to
legitimate taxpayers. While the IRS has made significant progress in combating identity theft refund fraud, it continues to be one of the biggest
challenges facing the agency.
Identity theft refund fraud
cost victims a total of $1.7 billion in stolen refunds in 2016 alone. Millions
of American families depend on this money to pay off debts, settle medical
bills, or plug gaps in the family budget. Worst of all, victims are often the
most vulnerable. In 2010, for example, 76,000 low-income senior citizens were
victims of this 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. 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 refund before the
real taxpayer, who is entitled to the refund, files his or her return.
The IP PIN provided to Rick and
Bonnie after their harrowing experience is an effective way to prevent this
fraud. An IP PIN is a unique six-digit number 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’s how it works. If a return
is e-filed 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 verifies the filer’s identity.
Until recently, IP PINs were
only available to previous victims of identity theft and to all residents of
Florida, Georgia, and Washington, D.C. Recently, the IRS announced that
it expanded eligibility for its IP PIN pilot program to taxpayers in
California, Delaware, Illinois, Maryland, Michigan, Nevada, and Rhode Island.
These states have the highest per-capita percentage of tax-related identity
theft in the country. In preparation for last year’s filing season, the IRS
issued nearly 3.5 million IP PINs to taxpayers, up from 770,000 in 2013.
Within just a month, the IRS rejected nearly 7,400 fraudulent tax returns that
had been filed electronically, and by mid-March had stopped nearly 1,500
fraudulent paper tax returns.
The IP PIN system works, and it
is time to extend this optional protection to all taxpayers. I have
introduced the Taxpayer Identity Protection Act to expand and make
permanent the IRS’s IP PIN pilot program across the nation over the next five
years. My bipartisan bill would take concrete action to help ensure that
tax refunds are sent to the taxpayers who are entitled to these refunds, not
misdirected to criminals who are seeking to rip-off American taxpayers.
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