IRS Told More Needs To Be Done to Fight Identity Theft "Epidemic"

By Ken Berry
It's not like the IRS isn't on the hot seat already, but another congressional committee turned up the heat even more on the nation's tax collection agency last week. A subcommittee of the House Oversight and Government Reform  the same committee that's investigating alleged wrongdoings regarding tax-exempt applications of Tea Party and other conservative groups  warned that the IRS has to improve its efforts to thwart identity theft issues. The problem, which has been escalating over recent years, is now being termed an "epidemic." 
The panel, headed by Chairman John Mica (R-FL), grilled IRS Principal Deputy Commissioner and Deputy Commissioner for Services and Enforcement Daniel Werfel, on August 2. It wasn't overly sympathetic to the IRS' plight. According to the Treasury Inspector General for Tax Administration (TIGTA), the number of incidents of taxpayer ID theft jumped to 1.9 million as of June 29, 2013, up from 1 million in fiscal year 2011. 
"The IRS complains of a lack of resources, but it has twenty-one units tackling the problem and it's gotten worse, not better," said Mica. "We're lucky [bank robber] Willie Sutton is no longer around today or he would be scamming the IRS." Mica added that he didn't want to pick on the IRS when it was down, but the agency "has a number of problems, and unfortunately, this continues."
Representatives from the other side of the aisle seemed to agree with the assessment. Panel member Gerry Connolly (D-VA) called the trend "an epidemic that is profoundly unacceptable." He noted, "If we can step up enforcement and deter identity theft, we can help taxpayers and our constituents."
Forced to go on the defensive, Werfel stood his ground. He explained that the IRS has implemented steps to deter ID theft since he assumed the leadership mantle less than three months ago. Werfel pointed out that at the midpoint of the year, the IRS had already conducted 1,100 investigations, producing 785 indictments. Furthermore, the IRS has suspended or rejected more than 4.6 million suspicious tax returns and closed 565,000 cases. "New procedures and programs have been adjusted to make the process faster," he said, referring to a faster recovery time for victims, due to a centralized effort and cooperation with banks and third-party vendors.
"We have 3,000 employees, more than double the number during last year's filing season, on what is one of the biggest challenges facing the IRS," said Werfel. "It is an evolving learning process, and the goal is to get ahead of the schemers. There is a lot of work to be done, but it is trending better."
Werfel cited several major obstacles in his path, such as the overwhelming volume and complexity of the problem, the need for upgraded technology filters and authentication procedures, and the lack of available funds. Due to the federal sequester, the IRS' budget was slashed by $618 million this year, coming on top of a reduction of $1 billion since 2010. The restraints have cost the IRS 8,000 jobs. "If we incur additional budget cuts, we would no longer be able to sustain our current level of effort on identity theft without significantly weakening other programs," lamented Werfel.
National Taxpayer Advocate Nina Olson told the panel that the IRS has bolstered its efforts since she first focused on the problem in 2004, but the agency needs to do much more. "They have not made comparable strides in providing assistance to victims. Despite some improvement in cycle times, they continue to be six months or longer," she said.
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