Hearing of the Senate Finance Committee - Protecting Taxpayers from Schemes and Scams During the 2015 Tax Filing Season

Hearing

Since the day the IRS opened its doors, scam artists have been hatching up slick new ways of stealing
taxpayer dollars from the Treasury. What's new is, they're now stealing Americans' identities and
personally threatening them on an industrial scale, while directly robbing them of their hard-earned
money. The fraudsters dream up new tactics and milk them for all they're worth before they start
getting caught. Then it's lather, rinse, repeat. Onto the next scam, always one step ahead of the law.
Today the committee will closely examine several of the fraudsters' latest strategies that are plaguing
taxpayers. The one that's hitting my home state of Oregon hardest is the fake phone call demanding
money or personal information on behalf of the IRS. In fact, these calls were the number one consumer
complaint registered with the Oregon Department of Justice last year. Not everybody knows the IRS
simply does not cold-call people making demands or threats. So it's pretty clear from my vantage point
that there's a lot more work to be done taking on this scourge.

Given the sophistication of this criminal activity and the fact that a lot of it comes from overseas, this
sure looks to me like an emerging type of organized crime. So the real question is, what's it going to take
to root it out and put the bad actors on the sidelines? How about more prosecutions, stronger
deterrents, or more cops on the beat? And what's the best way of getting the word out so that
taxpayers aren't tricked into surrendering their life savings to some intimidating voice on the other end
of the phone line?

But even if people manage to avoid the phone calls, you can bet the crooks are finding other ways to
profit. Tax preparation software has become the scammer's new fast lane. These sharks manage to
acquire a taxpayers' personal data from the black market or hack into commercial databases, and they
file false returns electronically. The victims may not find out until much later in tax season, and by then
it's too late. Already there have been thousands of reports like this in 2015. As we'll hear today, some
software vendors aren't doing enough to help prevent fraud.

In my view, part of the challenge is getting states, Internet tax services, and the IRS on the same
wavelength. Everybody's got to communicate and work together to make sure criminals can't just
nimbly slide from one jurisdiction to the next, as they rip off more unsuspecting Americans.

Taxpayers may choose to avoid software, but not even a paid tax preparer is guaranteed to be safe. In
fact, many of them don't have to meet any standards for competence. There are far too many con
artists out there willing and able to prey on the people who come through their doors. In some
egregious cases, they secretly falsify their victims' returns to boost the refunds, and they pocket the
difference. And once tax season ends, the crooks disappear from the storefronts they occupied, leaving
no trace of where they've gone.

A few states, including Oregon, have rules in place to help shield taxpayers from this kind of scam. But
most states don't. Senator Cardin and I introduced the Taxpayer Protection and Preparer Proficiency Act
at the beginning of this Congress to give all Americans the security they deserve. Our colleague Senator
Nelson is also a leader on this issue of keeping taxpayers safe from identity theft and fraud. And I'm sure
they share my desire to take on these challenges on a bipartisan basis.

There is no end to the ingenuity of tax scam artists. My hope this morning is that we'll get more fresh
ideas for catching up to this wave of fraud and stopping it. That can't come soon enough. So I'm looking
forward to talking with our witness panel here today, which I'm very happy to say includes Ms. Ellen
Klem, the director of consumer outreach and education in the Oregon Attorney General's office. Thank
you, Ms. Klem and all our witnesses, for being here during a time of year that's busy for all of you.

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