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Tax-Related Identity Theft Bill Clears House

May 24th 2016
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In a big nod to the escalating problem of tax-related identity theft, the House on May 16 passed a bipartisan bill that imposes a variety of new protective measures and programs to thwart the thieves.

The legislation – H.R. 3832, the Stolen Identity Refund Fraud Prevention Act of 2016 – was introduced by Rep. James Renacci (R-OH) and co-sponsored by Rep. John Lewis (D-GA).

Here’s a snapshot of the bill’s mandates:

  • Creates an office within the IRS as a point-of-contact for identity theft victims.
  • Amends the Internal Revenue Code to require forms related to employee wage statements, payment of wages as group-term life insurance, and any payments to be made on Form 1099-MISC for nonemployee compensation to be filed on or before Feb. 15.
  • Requires the US Treasury Department to notify taxpayers of unauthorized use of their identity and any criminal charges related to that.
  • Requires a taxpayer identification number on W-2 forms instead of Social Security numbers.
  • Imposes a criminal penalty on identity thieves.
  • Amends the Social Security Act to allow the IRS access to information in the National Directory of New Hires in order to identify and prevent fraudulent tax return filings and refund claims.
  • Requires the IRS to establish within its Criminal Investigation Division a liaison with local law-enforcement agencies. The liaison will be the primary source of contact for state and local law enforcement for tax-related identity theft issues. The liaison’s duties include ensuring that any information shared with state and local law-enforcement agencies is used only for prosecution of identity theft and not redisclosed to third parties.

In a prepared statement, Renacci said, “Tax-related identity theft is an evolving criminal activity that can happen to anyone. In fact, last tax season my identity was stolen and used to file a fraudulent tax return. Northeast Ohioans and taxpayers throughout the country deserve to have their hard-earned dollars shielded from thieves. That is why I am pleased to see the House take this important first step to better safeguard taxpayer dollars and reduce the hardships caused by this criminal activity. I look forward to working with my Senate colleagues to ensure this bill is signed into law.”

If the bill becomes law, it requires the Treasury secretary to submit a feasibility study to the House Ways and Means Committee and Senate Finance Committee within 180 days of enactment describing a program in which taxpayers who have filed identity theft affidavits can elect to prevent the processing of any federal tax return submitted electronically by that taxpayer or a person purporting to be that taxpayer. The study should also indicate whether implementing the program is recommended.

The Treasury secretary also is to use information under the Do Not Pay Initiative under Section 5 of the Improper Payments Elimination and Recovery Improvement Act of 2012 to help prevent tax refund fraud.

Within a year of the bill’s enactment as law, the Treasury Inspector General for Tax Administration, working with the Federal Communications Commission and Federal Trade Commission, is to report to Congress about identity theft phone scams in which scammers try to get taxpayers’ personal information by claiming to be calling from or on behalf of the IRS.

The bill doesn’t provide any additional funding to allow the programs to be carried out.

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