[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 2736 Introduced in Senate (IS)]
113th CONGRESS
2d Session
S. 2736
To amend the Internal Revenue Code of 1986 to prevent identity theft
related tax refund fraud, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 31, 2014
Mr. Hatch (for himself and Mr. Wyden) introduced the following bill;
which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to prevent identity theft
related tax refund fraud, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Tax Refund Theft
Prevention Act of 2014''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
(c) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; etc.
Sec. 2. Safe harbor for de minimis errors on information returns and
payee statements.
Sec. 3. Internet platform for Form 1099 filings.
Sec. 4. Requirement that electronically prepared paper returns include
scannable code.
Sec. 5. Single point of contact for identity theft victims.
Sec. 6. Criminal penalty for misappropriating taxpayer identity in
connection with tax fraud.
Sec. 7. Extend Internal Revenue Service authority to require truncated
social security numbers on Form W-2.
Sec. 8. Improvement in access to information in the National Directory
of New Hires for tax administration
purposes.
Sec. 9. Password system for prevention of identity theft tax fraud.
Sec. 10. Increased penalty for improper disclosure or use of
information by preparers of returns.
Sec. 11. Increase electronic filing of returns.
Sec. 12. Increased real-time filing.
Sec. 13. Limitation on multiple individual income tax refunds to the
same account.
Sec. 14. Identity verification required under due diligence rules.
Sec. 15. Report on refund fraud.
SEC. 2. SAFE HARBOR FOR DE MINIMIS ERRORS ON INFORMATION RETURNS AND
PAYEE STATEMENTS.
(a) In General.--Subsection (c) of section 6721 is amended--
(1) by striking ``Exception for De Minimis Failure to
Include All Required Information'' in the heading and inserting
``Exceptions for Certain De Minimis Failures'',
(2) by striking ``In general'' in the heading of paragraph
(1) and inserting ``Exception for de minimis failure to include
all required information'', and
(3) by adding at the end the following new paragraph:
``(3) Safe harbor for certain de minimis errors.--
``(A) In general.--If, with respect to an
information return filed with the Secretary--
``(i) there are 1 or more failures
described in subsection (a)(2)(B) relating to
an incorrect dollar amount, and
``(ii) no single amount in error differs
from the correct amount by more than $25,
then no correction shall be required and, for purposes
of this section, such return shall be treated as having
been filed with all of the correct required
information.
``(B) Exception.--Subparagraph (A) shall not apply
to returns required under section 6049.
``(C) Regulatory authority.--The Secretary may
issue regulations to prevent the abuse of the safe
harbor under this paragraph, including regulations
providing that this subparagraph shall not apply to the
extent necessary to prevent any such abuse.''.
(b) Failure To Furnish Correct Payee Statements.--Subsection (c) of
section 6722 is amended by adding at the end the following new
paragraph:
``(3) Safe harbor for certain de minimis errors.--
``(A) In general.--If, with respect to any payee
statement--
``(i) there are 1 or more failures
described in subsection (a)(2)(B) relating to
an incorrect dollar amount, and
``(ii) no single amount in error differs
from the correct amount by more than $25,
then no correction shall be required and, for purposes
of this section, such statement shall be treated as
having been filed with all of the correct required
information.
``(B) Exception.--Subparagraph (A) shall not apply
to payee statements required under section 6049.
``(C) Regulatory authority.--The Secretary may
issue regulations to prevent the abuse of the safe
harbor under this paragraph, including regulations
providing that this subparagraph shall not apply to the
extent necessary to prevent any such abuse.''.
(c) Conforming Amendments.--
(1) Subsection (i) of section 408 is amended by striking
``$10'' and inserting ``$25''.
(2) Paragraph (5) of section 3406(b) is amended--
(A) by striking ``$10'' both places it appears and
inserting ``$25'', and
(B) by adding at the end the following flush text:
``The preceding sentence shall not apply to payments of
interest to which section 6049 applies.''.
(3) Subparagraphs (A) and (B) of section 6042(a)(1) are
each amended by striking ``$10'' and inserting ``$25''.
(4) Paragraph (2) of section 6042(a) is amended by striking
``$10'' and inserting ``$25''.
(5) Paragraphs (1) and (2) of section 6044(a) are each
amended by striking ``$10'' and inserting ``$25''.
(6) Paragraph (1) of section 6047(d) is amended by striking
``$10'' and inserting ``$25''.
(7) Subsection (a) of section 6050B is amended by striking
``$10'' and inserting ``$25''.
(8) Subsection (a) of section 6050E is amended by striking
``$10'' and inserting ``$25''.
(9) Paragraphs (1) and (2) of section 6050N(a) are each
amended by striking ``$10'' and inserting ``$25''.
(10) Paragraphs (1) and (2) of section 6652(a) are each
amended by striking ``$10'' and inserting ``$25''.
(11) The heading of subsection (a) of section 6652 is
amended by striking ``$10'' and inserting ``$25''.
(d) Effective Date.--The amendments made by this section shall
apply to information returns required to be filed, and payee statements
required to be provided, on or after the date of the enactment of this
Act.
SEC. 3. INTERNET PLATFORM FOR FORM 1099 FILINGS.
(a) In General.--Not later than 3 years after the date of the
enactment of this Act, the Secretary of the Treasury (or such
Secretary's delegate) shall make available an Internet website or other
electronic media, similar to the Business Services Online Suite of
Services provided by the Social Security Administration, that will
provide taxpayers access to resources and guidance provided by the
Internal Revenue Service and will allow taxpayers to--
(1) prepare and file (in batches of not more than 50) Forms
1099,
(2) prepare Forms 1099 for distribution to recipients other
than the Internal Revenue Service, and
(3) create and maintain necessary taxpayer records.
(b) Early Implementation for Forms 1099-MISC.--Not later than 1
year after the date of the enactment of this Act, the Internet website
under subsection (a) shall be available in a partial form that will
allow taxpayers to take the actions described in such subsection with
respect to Forms 1099-MISC required to be filed or distributed by such
taxpayers.
SEC. 4. REQUIREMENT THAT ELECTRONICALLY PREPARED PAPER RETURNS INCLUDE
SCANNABLE CODE.
(a) In General.--Subsection (e) of section 6011 is amended by
adding at the end the following new paragraph:
``(5) Special rule for returns prepared electronically and
submitted on paper.--The Secretary shall require that any
return of tax which is prepared electronically, but is printed
and filed on paper, bear a code which can, when scanned,
convert such return to electronic format.''.
(b) Conforming Amendment.--Paragraph (1) of section 6011(e) is
amended by striking ``paragraph (3)'' and inserting ``paragraphs (3)
and (5)''.
(c) Effective Date.--The amendments made by this section shall
apply to returns of tax the due date for which (determined without
regard to extensions) is after December 31, 2014.
SEC. 5. SINGLE POINT OF CONTACT FOR IDENTITY THEFT VICTIMS.
(a) In General.--Not later than 180 days after the date of the
enactment of this Act, the Secretary of the Treasury (or such
Secretary's delegate) shall establish new procedures to ensure that any
taxpayer whose return has been delayed or otherwise adversely affected
due to misappropriation of the taxpayer's taxpayer identity (as defined
in section 6103(b)(6) of the Internal Revenue Code of 1986) has a
single point of contact who--
(1) is an individual employee of the Internal Revenue
Service, and
(2) tracks the case of the taxpayer from start to finish
and coordinates with other specialized units to resolve case
issues as quickly as possible.
(b) Change of Contact.--The procedures under subsection (a) shall
provide that the single point of contact may be changed--
(1) upon request of the taxpayer, or
(2) in any case where the individual employee ceases
employment or is otherwise unavailable for any period, or a
change is required to meet agency staffing needs, but only if
the taxpayer is notified of any such change within 5 business
days.
SEC. 6. CRIMINAL PENALTY FOR MISAPPROPRIATING TAXPAYER IDENTITY IN
CONNECTION WITH TAX FRAUD.
(a) In General.--Section 7206 is amended--
(1) by striking ``Any person'' and inserting the following:
``(a) In General.--Any person'', and
(2) by adding at the end the following new subsection:
``(b) Misappropriation of Identity.--Any person who willfully
misappropriates another person's taxpayer identity (as defined in
section 6103(b)(6)) for the purpose of making any list, return,
account, statement, or other document submitted to the Secretary under
the provisions of this title shall be guilty of a felony and, upon
conviction thereof, shall be fined not more than $250,000 ($500,000 in
the case of a corporation) or imprisoned not more than 5 years, or
both, together with the costs of prosecution.''.
(b) Aggravated Identity Theft.--Section 1028A(c) of title 18,
United States Code, is amended by striking ``or'' at the end of
paragraph (10), by striking the period at the end of paragraph (11) and
inserting ``; or'', and by adding at the end the following new
paragraph:
``(12) section 7206(b) of the Internal Revenue Code of 1986
(relating to misappropriation of identity in connection with
tax fraud).''.
(c) Effective Date.--The amendments made by this section shall
apply to offenses committed on or after the date of the enactment of
this Act.
SEC. 7. EXTEND INTERNAL REVENUE SERVICE AUTHORITY TO REQUIRE TRUNCATED
SOCIAL SECURITY NUMBERS ON FORM W-2.
(a) In General.--Paragraph (2) of section 6051(a) is amended by
striking ``his social security number'' and inserting ``an identifying
number for the employee''.
(b) Effective Date.--The amendment made by this section shall take
effect on the date of the enactment of this Act.
SEC. 8. IMPROVEMENT IN ACCESS TO INFORMATION IN THE NATIONAL DIRECTORY
OF NEW HIRES FOR TAX ADMINISTRATION PURPOSES.
(a) In General.--Paragraph (3) of section 453(i) of the Social
Security Act (42 U.S.C. 653(i)) is amended to read as follows:
``(3) Administration of federal tax laws relating to
fraud.--The Secretary of the Treasury shall have access to the
information in the National Directory of New Hires for the sole
purpose of identifying and preventing fraudulent tax return
filings and claims for refund under the Internal Revenue Code
of 1986.''.
(b) Effective Date.--The amendment made by this section shall take
effect on the date of the enactment of this Act.
SEC. 9. PASSWORD SYSTEM FOR PREVENTION OF IDENTITY THEFT TAX FRAUD.
(a) In General.--The Secretary of the Treasury shall implement an
identity theft tax fraud prevention program under which any individual
taxpayer may elect to be provided with a unique password which, as a
result of such election, will be required to be included on any Federal
tax return filed by such individual before the return will be
processed. Such program shall be available not later than January 1 of
the first calendar year beginning on or after the date that is 2 years
after the date of the enactment of this Act.
(b) Study and Report.--The Secretary of the Treasury shall conduct
a study of the program under subsection (a) and, not later than 3 years
after the January 1 date under such subsection, shall report to the
Committee on Finance of the Senate and the Committee on Ways and Means
of the House of Representatives on the efficacy of such program in
reducing tax refund fraud. Such report shall include a recommendation
as to whether the program under subsection (a) should be made
mandatory, rather than elective, for all taxpayers.
SEC. 10. INCREASED PENALTY FOR IMPROPER DISCLOSURE OR USE OF
INFORMATION BY PREPARERS OF RETURNS.
(a) In General.--Section 6713 is amended--
(1) by redesignating subsections (b) and (c) as subsections
(c) and (d), respectively, and
(2) by inserting after subsection (a) the following new
subsection:
``(b) Enhanced Penalty for Improper Use or Disclosure Relating to
Identity Theft.--
``(1) In general.--In the case of a disclosure or use
described in subsection (a) that is made in connection with a
crime relating to the misappropriation of another person's
taxpayer identity (as defined in section 6103(b)(6)), whether
or not such crime involves any tax filing, subsection (a) shall
be applied--
``(A) by substituting `$1,000' for `$250', and
``(B) by substituting `$50,000' for `$10,000'.
``(2) Separate application of total penalty limitation.--
The limitation on the total amount of the penalty under
subsection (a) shall be applied separately with respect to
disclosures or uses to which this paragraph applies and to
which it does not apply.''.
(b) Criminal Penalty.--Section 7216(a) is amended by striking
``$1,000'' and inserting ``$1,000 ($100,000 in the case of a disclosure
or use to which section 6713(b) applies)''.
(c) Effective Date.--The amendments made by this section shall
apply to disclosures or uses after the date of the enactment of this
Act.
SEC. 11. INCREASE ELECTRONIC FILING OF RETURNS.
(a) In General.--Subparagraph (A) of section 6011(e)(2) is amended
by striking ``250'' and inserting ``the applicable number of''.
(b) Applicable Number.--Subsection (e) of section 6011, as amended
by this Act, is amended by adding at the end the following new
paragraph:
``(6) Applicable number.--For purposes of paragraph (2)(A),
the applicable number is--
``(A) in the case of returns and statements
relating to calendar years before 2015, 250,
``(B) in the case of returns and statements
relating to calendar year 2015, 100,
``(C) in the case of returns and statements
relating to calendar year 2016, 50, and
``(D) in the case of returns and statements
relating to calendar years after 2016, 20.''.
(c) Returns Filed by a Tax Return Preparer.--
(1) In general.--Subparagraph (A) of section 6011(e)(3) is
amended to read as follows:
``(A) In general.--The Secretary shall require
that--
``(i) any individual income tax return, and
``(ii) any return or statement under
subpart B, C, or E of part III of this
subchapter,
which is prepared by a tax return preparer be filed on
magnetic media. The Secretary may waive the requirement
of the preceding sentence if the Secretary determines,
on the basis of an application by the tax return
preparer, that the preparer cannot meet such
requirement based on technological constraints
(including lack of access to the Internet).''.
(2) Conforming amendment.--Paragraph (3) of section 6011(e)
is amended by striking subparagraph (B), and by redesignating
subparagraph (C) as subparagraph (B).
(d) Effective Dates.--The amendments made by this section shall
apply to returns the due date for which (determined without regard to
extensions) is after December 31, 2014.
SEC. 12. INCREASED REAL-TIME FILING.
(a) Accelerated Filing of Forms W-2 and W-3.--
(1) In general.--Section 6071 is amended by redesignating
subsection (c) as subsection (d), and by inserting after
subsection (b) the following new subsection:
``(c) Returns Relating to Employee Wage Information.--Returns and
statements made under sections 6051 and 6052 shall be filed on or
before February 15 of the year following the calendar year to which
such returns relate.''.
(2) Conforming amendment.--Subsection (b) of section 6071
is amended by striking ``subparts B and C'' and inserting
``section 6053 and subpart B''.
(3) Effective date.--The amendments made by this subsection
shall apply to returns and statements relating to calendar
years beginning after the date of the enactment of this Act.
(b) Accelerated Filing for Certain Forms 1099.--
(1) In general.--Subsection (c) of section 6071, as amended
by subsection (a), is amended--
(A) by striking ``Wage Information'' in the heading
and inserting ``Wage Information and Forms 1099-MISC'',
and
(B) by inserting ``, and any return which is filed
on Form 1099-MISC,'' after ``6052''.
(2) Conforming amendment.--Subsection (b) of section 6071,
as amended by this Act, is amended by striking ``section 6053
and subpart B of part III of this subchapter'' and inserting
``subpart B of part III of this subchapter (other than returns
filed on Form 1099-MISC)''.
(3) Effective date.--The amendments made by this subsection
shall apply to returns relating to calendar years beginning
after December 31, 2014.
(c) Study Regarding Administrative Implementation.--Not later than
January 1, 2017, the Secretary of the Treasury shall report to the
Committee on Finance of the Senate and the Committee on Ways and Means
of the House of Representatives including--
(1) a recommendation of whether the due dates for filing
Forms W-2 and W-3 with the Internal Revenue Service and the
Social Security Administration should be accelerated to January
31 to match the due date for furnishing copies of such forms to
the recipient of the reported income,
(2) recommendations for processes--
(A) to match the information reported on Forms W-2
and Forms 1099-MISC for the effective processing of
returns and accurate determination of refunds, and
(B) to correct errors on such documents, and
(3) any other recommendations such Secretary may have for
accelerating information reporting, including the
identification of any other forms that should be due on an
accelerated schedule in order to prevent tax refund fraud.
SEC. 13. LIMITATION ON MULTIPLE INDIVIDUAL INCOME TAX REFUNDS TO THE
SAME ACCOUNT.
(a) In General.--Not later than 180 days after the date of
enactment of this Act, the Secretary of the Treasury shall issue
regulations that restrict the delivery or deposit of multiple
individual income tax refunds from the same tax year to the same
individual account or mailing address.
(b) Exception.--The regulation promulgated under subsection (a)
shall provide that the restrictions shall not apply in cases and
situations where the Secretary of the Treasury determines there is not
a likelihood of tax fraud.
SEC. 14. IDENTITY VERIFICATION REQUIRED UNDER DUE DILIGENCE RULES.
(a) In General.--Subsection (g) of section 6695 is amended by
adding at the end the following new sentence: ``Such due diligence
requirements shall include a requirement that such preparer verify (in
such manner and with such documentation as the Secretary shall provide)
the identity of the taxpayer with respect to such return or claim for
refund.''.
(b) Effective Date.--The amendment made by this section shall apply
to returns or claims for refund filed after December 31, 2014.
SEC. 15. REPORT ON REFUND FRAUD.
Not later than 1 year after the date of the enactment of this Act,
and annually thereafter, the Secretary of the Treasury (or the
Secretary's delegate) shall report to the Committee on Finance of the
Senate and the Committee on Ways and Means of the House of
Representatives on the extent and nature of fraud involving the use of
a misappropriated taxpayer identity with respect to claims for refund
under the Internal Revenue Code of 1986 during the preceding completed
income tax filing season, and the detection, prevention, and
enforcement activities undertaken by the Internal Revenue Service with
respect to such fraud, including--
(1) the development of fraud detection filters and how they
are or may be updated and improved;
(2) the effectiveness of fraud detection activities, and
the ways in which such effectiveness is measured; and
(3) the methods by which such Service categorizes of refund
fraud, and the amounts of fraud that are associated with each
category.
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