It was a stark critique of the Internal Revenue Service’s growing problem of identity thef, tax refund fraud and the inability to help victims.
The agency has “not responded with the urgency that the identity theft crisis demands,” according to Nina Olson, whose agency aids taxpayers with IRS issues.
Olson’s National Taxpayer Advocate’s annual report to Congress this week outlined the mounting issue of ID theft and the the failure of the IRS to provide rapid and effective help.
Former IRS commissioner Douglas Shulman in 2008 vowed to create a “seamless” process to help ID theft victims. But the report is adament that the agency has come up short in its commitment.
“Despite the proclamation of the Commissioner to Congress that identity theft is a top priority, victims who come to the IRS for assistance today will routinely need to speak with multiple employees and wait more,” the report states.
The IRS has established 21 different units to address identity theft cases, each with their own rules and procedures — a strategy that is far from the “centralized traffic cop” function that the National Taxpayer Advocate recommended and the Commissioner committed to in 2008.
Tax-related identify theft is growing at an alarming pace. In fiscal year 2012, the IRS Identity Protection Specialized Unit received nearly 450,000 cases, a 78 percent increase over fiscal year 2011.
The Taxpayer Advocate Service (TAS) has seen a similar increase in stolen identity case receipts; an increase of more than 60 percent from fiscal year 2011 to fiscal year 2012, and an increase of more than 650 percent from fiscal year 2008.
Identity theft cases comprise 25 percent of TAS’s fiscal 2012 case receipts and were the top issue in TAS case receipts for the last two fiscal years.
The National Taxpayer Advocate is concerned that:
- The IRS is moving backward — away from a centralized approach to assisting identity theft victims — and is increasing the risk that taxpayer-victims may fall through the cracks;
- After years of ineffective efforts to re-engineer its processes, the IRS still takes too long to fully resolve the accounts of victims;
- While the Identity Protection Personal Identification Number (IP PIN) that the IRS has developed provides additional security, it does not cover all victims;
- The Taxpayer Protection Unit may not be sufficiently staffed to handle the volume of calls from affected taxpayers;
- Congress may unnecessarily create additional exceptions to taxpayer privacy protections.
In another striking example of how the federal government unwittingly facilitates tax-related identity theft, the National Taxpayer Advocate pointed to the so-called Death Master File (DMF), a list of recently deceased individuals that includes their full name, SSN, date of birth, date of death, and the county, state, and ZIP code of the last address on record.
The Social Security Administration’s release of this information as “legally man¬dated” under the Freedom of Information Act, but this position has not been tested.
To eliminate uncertainty, the National Taxpayer Advocate recommended in 2011 that Congress pass legislation to clarify that public access to the DMF can and should be limited.
The National Taxpayer Advocate’s report states that it “has raised this issue at every opportunity over the past two years. Although some genealogy websites have voluntarily agreed to curtail the availability of DMF information, not much has been done by either Congress or the execu¬tive branch. In the meantime, taxpayers continue to face harm due to the inaction of the government.”
Here are the National Taxpayer Advocate’s preliminary recommendations for the IRS:
- Issue IP PINs throughout the year, as soon as the identities and addresses of the right¬ful SSN owner are verified. The issuance of IP PINs should not be tied to the final resolution of an identity theft case.
- Retain the Identity Protection Specialized Unit as the single point of contact with identity theft victims throughout the duration of their cases.
- Move the Identity Protection Specialized Unit out of the Accounts Management function, to afford it greater autonomy as it acts as the face of the IRS to identity theft victims.
- Expand the Identity Protection Specialized Unit’s role in managing identity theft case resolution, such as conducting initial and final global account reviews on all identity theft cases.
- Provide sufficient staffing for the Identity Protection Specialized Unit to take on this expanded role.
- Implement agreements between the Identity Protection Specialized Unit and the various functions that work identity theft cases to set forth acceptable time-frames for completing the required actions and consequences for not meeting the time-frames.
- Strive for a Level of Service within the Taxpayer Protection Unit equal to or greater than the Level of Service goal set for the main toll-free phone line.
- Insert into every agreement with state and local agencies an explicit clause that says that return information of an identity thief may be used only for prosecution of identity theft-related crimes (with no re-disclosure to third parties).
- Together with the Social Security Administration, seek modification of the consent judgment requiring the release of personal identifying information of decedents.
- Include TAS at all levels of identity theft program and procedural planning, including front-line teams, training development, guidance, and advisory and executive steering committees.