Statements on Introduced Bills and Joint Resolutions

Floor Speech

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Ms. COLLINS. Mr President, I am pleased to introduce with my colleague from Alabama, Senator Jones, the Taxpayer Identity Protection Act of 2018, a bill that seeks to help prevent American taxpayers and seniors from falling victim to identity theft and tax refund fraud.

As of May 17, the IRS had received more than 141.5 million individual income tax returns for the 2018 filing season. Of that number, nearly 75 percent were eligible for refunds. These refunds are not a gift from the Federal government--they are the return of funds belonging to taxpayers that were over-withheld from their paychecks last year. In the past few months, millions of American families have been eagerly awaiting these tax refunds, money they may need to pay off debts, medical bills, and plug gaps in the family budget. Unfortunately, for many Americans these refunds have not yet come.

Taxpayers are not the only ones eagerly awaiting these refunds. 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 like hospitals, schools, or assisted living facilities, often by recruiting employees to steal that information. The fraudster then uses this information to prepare fraudulent tax returns.

The thieves make sure to file early, as soon as the tax filing season opens in January, to increase the odds that they can get a refund before the real taxpayer 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 fake returns.

These fraudsters work under the premise of ``file early, file often.'' Once the thieves file the fraudulent tax return, the IRS processes it and issues a refund. With each refund worth on average $2,778, the money can add up quickly.

This is not a victimless crime. Last year, 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 years to get the refunds to which they are legally entitled. Many are re-victimized year after year. A substantial number become victims of other forms of identity theft. Worst of all, victims are often the most vulnerable: elderly citizens who earn so little they are not even required to file a tax return. The IG estimates that 76,000 low-income elderly citizens were victims of tax-fraud identity theft in 2010 alone.

In 2016, the Lewiston Sun Journal published a story about a couple, Rick Zaccaro and his wife, Bonnie Washuk, who were victims of tax refund fraud. They had filed their taxes in late January 2015, and when Rick, a retired financial analyst for the Postal Service, was checking the status of their return online in early February, he 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 claim was paid while their legitimate tax filing, with their appropriate W2s, was in limbo. It took months of worrying, frozen bank accounts, and a lot of calls to multiple government offices for them to try and straighten things out. When they did finally receive their 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 their tax returns and refunds to be processed without delay and helps prevent the misuse of their Social Security Numbers on fraudulent income tax returns. If a return is e-filed with their Social Security Number and an incorrect or missing IP PIN, the IRS's system automatically rejects the tax return until it is submitted with the correct IP PIN or they file 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 IRS determines if the return actually belongs to the taxpayer.

In addition to victims of identity theft, 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 have the highest per-capita percentage of tax-related identity theft in the country. Taxpayers in these three jurisdictions are not required to use an IP PIN but may opt-in to the program if they want the extra layer of identity protection.

In preparation for the 2018 Filing Season, the IRS issued nearly 3.5 million IP PINs to taxpayers, up from 770,000 in 2013. According to the IRS, as of February 28, 2018, it had rejected approximately 7,376 fraudulent e-filed tax returns, and as of March 15, 2018, it had stopped 1,442 paper-filed tax returns from posting to the Master File.

The Taxpayer Identity Protection Act of 2018 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 incrementally expand its pilot program nationally, in phases, over a five-year period. Scaling out the program would give all taxpayers 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. The IP PIN pilot program has worked to protect against identity theft and the IRS supports its expansion over the next five-years. I urge my colleagues on both sides of the aisle to support the adoption of Taxpayer Identity Protection Act of 2018.

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