[Senate Hearing 113-813]
[From the U.S. Government Publishing Office]
S. Hrg. 113-813
TAX-RELATED IDENTIFY THEFT: AN EPIDEMIC FACING SENIORS AND TAXPAYERS
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HEARING
BEFORE THE
SPECIAL COMMITTEE ON AGING
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
WASHINGTON, DC
__________
WEDNESDAY, APRIL 10, 2013
__________
Serial No. 113-3
Printed for the use of the Special Committee on Aging
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SPECIAL COMMITTEE ON AGING
BILL NELSON, Florida, Chairman
RON WYDEN, Oregon SUSAN M. COLLINS, Maine
ROBERT P. CASEY JR, Pennsylvania BOB CORKER, Tennessee
CLAIRE McCASKILL, Missouri ORRIN HATCH, Utah
SHELDON WHITEHOUSE, Rhode Island MARK KIRK, Illinois
KIRSTEN E. GILLIBRAND, New York DEAN HELLER, Nevada
JOE MANCHIN III, West Virginia JEFF FLAKE, Arizona
RICHARD BLUMENTHAL, Connecticut KELLY AYOTTE, New Hampshire
TAMMY BALDWIN, Wisconsin TIM SCOTT, South Carolina
JOE DONNELLY Indiana TED CRUZ, Texas
ELIZABETH WARREN, Massachusetts
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Kim Lipsky, Majority Staff Director
Priscilla Hanley, Minority Staff Director
CONTENTS
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Page
Opening Statement of Chairman Bill Nelson........................ 1
Prepared Statement........................................... 60
Statement of Ranking Member Susan M. Collins..................... 4
Prepared Statement........................................... 68
PANEL OF WITNESSES
Marcy Hossli, Victim of Tax Refund Fraud......................... 6
Sal Augeri, Detective, Criminal Intelligence Bureau, Tampa Police
Department..................................................... 10
Honorable Kathryn Keneally, Assistant Attorney General, Tax
Division, United States Department of Justice.................. 19
Honorable J. Russell George, Treasury Inspector General for Tax
Administration, United States Department of the Treasury....... 28
APPENDIX
Prepared Witness Statements
Marcy Hossli, Victim of Tax Refund Fraud......................... 8
Sal Augeri, Detective, Criminal Intelligence Bureau, Tampa Police
Department..................................................... 13
Honorable Kathryn Keneally, Assistant Attorney General, Tax
Division, United States Department of Justice.................. 22
Honorable J. Russell George, Treasury Inspector General for Tax
Administration, United States Department of the Treasury....... 30
ADDITIONAL STATEMENTS FOR THE RECORD
Colleen M. Kelley, National President, National Treasury
Employees Union................................................ 70
TAX-RELATED IDENTIFY THEFT: AN EPIDEMIC FACING SENIORS AND TAXPAYERS
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WEDNESDAY, APRIL 10, 2013
U.S. Senate,
Special Committee on Aging,
Washington, DC.
The Committee met, pursuant to notice, at 2:02 p.m., in
Room SD-562, Dirksen Senate Office Building, Hon. Bill Nelson,
Chairman of the Committee, presiding.
Present: Senators Nelson, McCaskill, Donnelly, Warren,
Collins, and Ayotte.
OPENING STATEMENT OF SENATOR BILL NELSON, CHAIRMAN
The Chairman. Good afternoon.
Senator Collins will be along in a moment, and she had
called and requested that we go ahead.
I want to thank all of you for being here today to discuss
an issue that is becoming increasingly apparent especially as
we are approaching tax day.
Over the past couple of years, this problem has been
exploding across the country. It is highly relevant and
prevalent in my State of Florida. Since 2010, our office has
received over a thousand complaints from individuals who file
their taxes only to be told by the IRS that their refund had
already been claimed by someone else.
Now, you can imagine someone files their IRS return and IRS
responds, well, your return has already been filed. I must say,
as I approached this tax period, I have had that thought
several times.
Well, you remember Willie Sutton, and he said the reason he
robbed banks was that was where the money is. Well, today's
criminals looking for money, they do not need to go stand on
the corner and deal drugs. They do not need to use a crowbar,
because the laptop has replaced the crowbar.
You will hear from our detective from Tampa how street
crime has actually diminished as this new wave of crime is so
much easier and where they can sit in their residence with a
laptop and rake in thousands and thousands of dollars to the
point at which the IRS is estimating that this is over a $5
billion crime. And, of course, who is it coming from? It is
coming from the U.S. Treasury and they are getting the money
right from their own home.
So, we are dealing with a new type of criminal. These
criminals are gaining access to people's social security
numbers. They are getting other personal information and they
are filing these fraudulent tax returns in somebody else's name
creating a fictitious tax return in order to get a tax refund.
They file electronically, and they have then the tax refund
loaded onto a pre-paid debit card without providing the
physical address or even without opening a bank account to make
it all the more difficult to trace.
Now, you remember last month we talked about the Jamaican
lotto scam where they were intimidating seniors into sending
them money and we found that these third-party cards, these
debit cards, were a preferred way that the fraudsters could get
the money sent to them that made it less likely to be traced.
The same thing is happening here. So, some crooks steal a few
thousand dollars while others steal millions of dollars.
According to the Treasury Inspector General for Tax
Administration, we are losing over $5 billion each year to the
crime. Now, the problem is getting worse.
Last year the IRS reported identity theft incidences nearly
tripled. That was between 2010 and 2011. The Federal Trade
Commission recently reported that the crime is continuing to
climb at an astronomical rate eclipsing even identity theft-
related credit card fraud as shown in this chart.
Look at 2008 all the way to 2012. Tax related fraud is the
red bar. The dark bar is the credit card fraud. So, obviously
that is what is happening. We have identified maybe a dozen
states where this is more prevalent than others. My State of
Florida is certainly one of them.
Now, why is it here? This is the Aging Committee. Because
they are preying on the elderly. According to a recent
investigation by the Treasury's Inspector General, seniors
along with low income people who are not required to file tax
returns, students also aged 16 to 22, and deceased individuals
are among the most frequent targets of these tax thieves.
Why deceased? I actually had a hearing on this in the
Subcommittee that I chaired in the Finance Committee. You may
be surprised to find out that when a person dies, their Social
Security number is published by the Social Security
Administration.
I have tried nine ways to Sunday to get the Commissioner of
Social Security to delay putting up in the putting up in the
public domain, now, there are certain entities that would have
reason to have access. I have tried to say, well, you can have
access for those entities that have a legitimate reason to
know. But why put it out there so that people can grab a Social
Security number and an identity and suddenly file a tax return?
Needless to say, there have been a number of grieving
parents who have lost a child that that child's identity is
stolen and used for these purposes.
Now, these criminals get more and more organized, our
ability to detect and prevent identity theft is lagging behind
their ability to get organized.
Now, fortunately, the IRS and the Department of Justice,
who we will hear from in the second panel, have recognized the
scope of this problem and they have shown a determination in
developing new policies to turn the tide on these criminals.
They have formed task forces and information sharing
programs to streamline enforcement actions against known
fraudsters. Although these are steps in the right direction,
there are still many shortcomings that we need to be
addressing, and we are going to address some of those here
today.
We have taxpayers like Susan Fox-Greenberg of Parkland,
Florida, for example, who had to wait two years to get her
$21,000 refund after falling victim to this scheme. That is two
years to get a tax refund. That is not acceptable.
But unfortunately, it is illustrative of what has happened
of the long wait victims have had to endure before receiving
the refund that they are owed.
We have had some help with the media in getting this out.
For some reason, it is concentrated in Tampa, also in Miami.
CBS Channel 4, WFOR, has really made this a cause celebre as
they have tried to alert people to what is happening and these
kind of instances that our public is getting fleeced and in the
process the taxpayer is getting fleeced.
Last year, it took the IRS an average of 196 days to
resolve the identity theft cases and the increase in the number
of cases has resulted in a backlog of 300,000 cases with an
average wait time more than 180 days.
Obviously, you know that many Americans rely on getting
that tax refund back so that they can pay their bills; and they
should not have to wait six months much less they should not
have to wait two years as we have seen some people have to do.
The bottom line is that the IRS is going to be able to
better protect and serve taxpayers if we can reduce that time.
Victims should not have to go through the mountains of IRS red
tape to get their cases resolved or tax records cleaned up.
I want to give credit where credit is due. The IRS has been
working on this. You should have heard some of the horror
stories that we had to begin with about two years ago when I
had that hearing in the Finance Committee.
At a previous hearing on this topic, we heard testimony
from several victims including a father who had recently lost
his infant daughter, one of the fraudsters stole the baby's
Social Security number; from that Social Security death master
file, filed a fake return, and that parent then had to deal
with the IRS when it rejected his legitimate family tax return
that, since it was the previous year had his daughter as a
dependent. They should not have to go through this.
So, stories like this are what brings us here today; and it
is why we have filed the Theft and Tax Fraud Prevention Act.
This legislation includes provisions requiring the IRS to speed
up the time that it takes victims to get their refunds. It
directs the agency to develop the real-time system for
accelerating information matching.
Often the IRS sends a check out the door before it can
verify whether the information on the return is correct. I also
want to credit the IRS that a couple of years ago the
legitimate taxpayers had no way of filing their returns. They
said you cannot file a return. It has already been filed, even
though it was fraudulent; and once you got that resolved, they
needed some way of having security that they were going to be
able to file in the future.
We got the IRS and IRS did this. Thank you. Giving them a
special personal identification number so that they could deal
through that identification in addition to their Social
Security.
So, this bill also expands the Identity Protection PIN
program, and we have heard from a number of victims that that
program has clearly helped.
Now, one example is a lady named Ms. Carson, a 70-year-old
grandmother from Aventura. She did not receive a PIN number
when her refund was stolen just in 2011. When she called the
IRS just last month to ensure that she would not be victimized
a second time, she was astonished to find that a fraudulent tax
refund had yet again been filed in her name.
Another victim who had trouble receiving a PIN is Marcy
Hossli of Lakeworth, and she is here today and she is going to
share her story with us.
As we get close to April the 15th, in these final days, it
is important to examine how tax-related identity theft
continues to be a drain on the U.S. Treasury and a hardship for
the innocent victims.
As more and more companies require our personal information
in exchange for vital services, it is all the more critical
that we raise the standard for information security. And the
fact is that until we do a better job of enforcing our privacy
laws and helping institutions properly safeguard the personal
information of their patrons, this problem is only going to get
worse.
That is why we have to do more to contain what is becoming
an epidemic. We must help right those who have been wronged and
we must enact policies to help prevent this from happening to
others.
Senator Collins, I had explained to them that you had said
for me to go ahead and we are glad you are here. Your comments
please.
OPENING STATEMENT OF SENATOR SUSAN M. COLLINS
Senator Collins. Thank you very much, Mr. Chairman.
First, let me apologize for my late arrival. There was
nothing I could do about it. I got here as quickly as I could.
I want to begin by saluting your personal leadership and
determination on this issue. You have been the member of
Congress who has done more to shine a spotlight on this problem
than anyone else, and I am delighted to join you at this
hearing today.
Next Monday, April 16, is tax day, the deadline for
individual tax returns to be filed. I have a feeling that is
not news to anybody in this room. By the close of the day on
Monday, the IRS will likely receive more than 146 million
individual income tax returns.
Nearly 83 percent of these filers will be eligible for
refunds. These refunds are not a gift from the Federal
Government. They are the return of funds belonging to taxpayers
over withheld from their paychecks last year.
In the coming weeks, millions of American families will be
eagerly awaiting these tax refunds, money that they may need to
pay off debts or to plug gaps in their family budgets.
But taxpayers are not the only ones eagerly awaiting these
refunds. Criminal gangs have figured out that it is far cheaper
and easier for them to steal taxpayers' identities and hijack
their tax refunds than it is to traffic in drugs, rob banks, or
fence stolen property.
The IRS reports that the number of identity theft related
tax fraud cases has exploded from approximately 52,000 in 2008
to close to one million in 2012; and these numbers, shocking as
they are, probably underestimate the problem.
An analysis by the Treasury Inspector General for Tax
Administration suggests another 1.5 million tax returns with
the refunds totaling in excess of $5 billion are being scammed
each year.
According to media reports and law enforcement officials,
the scam works like this. Identity thieves obtain Social
Security numbers and other sensitive personal information from
sources like hospitals, schools, or assisted living facilities
often by recruiting employees to steal that information.
They then use this information to prepare fraudulent tax
returns. The thieves make sure to file early as soon as the tax
filing season opens in January to increase the odds that they
can get a refund before the real taxpayer sends in his or her
return.
The thieves are known to hold what they call ``make it
rain'' parties where they bring stolen laptops to motel rooms
with Internet access and work together churning out scores of
bank returns. With each refund worth on average $3500, the
money can add up quickly.
Once the thefts file the fraudulent tax returns, the IRS
processes them and issues refunds, at times by loading the
refund onto a prepaid card like those issued by Green Dot and
NetSpend. These cards are like cash and can be used by thefts
without identification or other verification.
You may be wondering why the IRS processes these fraudulent
returns in the first place. I know I certainly did. The answer
is simple. Taxpayers are entitled to file their returns as
early as mid January but the IRS does not receive the
information it needs to verify a taxpayer's earnings and
withholdings until often the end of March.
Of course, there are other ways the IRS could figure out
that it is being scammed. The Inspector General discovered that
criminals often use the same physical address for the
fraudulent returns they file. For example, in 2010, criminals
used the exact same physical address in Lansing, Michigan to
file more than 2100 returns and receive $3.3 million in refunds
from these returns. Another address in Chicago, the same
address, was used on 765 tax returns producing refunds of more
than $900,000.
This is not a victimless crime. Taxpayers who have refunds
hijacked by fraudsters often wait years to get the refunds to
which they are entitled. Many are re-victimized year after year
as we will hear from one of our witnesses today.
A substantial number become victims of other forms of
identity fraud. Worst of all, these victims are often the most
vulnerable elderly citizens who earn so little that they are
not even required to file a return. The IG estimates that
76,000 low income elderly citizens were victims of tax fraud
identity theft in 2010 alone.
Mr. Chairman, you have also indicated that your home state
has been hit especially hard. According to the Federal Trade
Commission, Florida has the highest per capita rate of reported
identity theft complaints in the country.
By that measure, my home State of Maine has been relatively
fortunate because we rank 46 for reported identity theft
complaints. But I will tell you that that fact provides little
solace because the number of tax fraud related complaints has
risen dramatically in Maine in recent years in keeping with the
national trend; and all of those affected by this fraud,
whether they live in Maine or Florida or elsewhere suffer the
same way.
Again, Mr. Chairman, I look forward to the testimony of our
witnesses and to working with you as we seek to combat this
epidemic of identity theft tax fraud.
Thank you.
The Chairman. Thank you, Senator Collins.
We are first going to hear from Marcy Hossli. She is a
victim. And then, we are going to hear from Detective Sal
Augeri and he is going to explain to you some of the things
that it is almost unbelievable but how street crime has
actually gone down as this crime has gone up, and as this crime
has gone up, the gross of these criminals has grown larger.
So, you are going through some interesting stuff today.
Ms. Hossli.
STATEMENT OF MARCY HOSSLI, VICTIM OF TAX REFUND FRAUD
Ms. Hossli. Chairman Nelson, Ranking Member Collins and
other members of the committee, I am the victim of identity
theft through tax fraud three years in a row now.
On March 26, 2012, I received a letter from the IRS
informing me that I was a victim. That was the beginning of a
long and frustrating journey that continues today.
In recent months, I have finally gotten refunds from my
2010 and 2011 taxes but I am still waiting to get my refund
from my 2012 taxes, and I really need the money. I am a cancer
survivor. I was diagnosed with Lymphoma in 2005. I had breast
cancer surgery last year, and the Lymphoma has returned. I
currently owe about $4000 in medical bills.
The letter that I first received from the IRS informed me
that I had been a victim of tax fraud for my 2010 and 2011
taxes. They said red flags were raised because of suspicious
claims on the tax return that was submitted in my name. They
also told me that it would take three months for them to
process my case. I was told to print and mail my 2010 and 2011
tax returns and send some additional items.
The IRS also said they would issue me a six digit PIN
number later that year to use on my tax returns for the next
three years. I am still waiting for that PIN number.
The IRS also told me to file my case with local police, the
Federal Trade Commission, and Equifax. I did all that and more.
I called the Palm Beach County Sheriff's Department and filed a
report. They told me it just ends up in a file. I asked them
about participating in the IRS Law Enforcement Assistance
Program, or LEAP, a program that enables local law enforcement
to more easily pursue identity theft cases. They had never
heard of it. They said they would get back with me after
looking into it, but I never heard back.
I had done my own taxes on Turbo Tax for my 2010 and 2011
taxes. But this year I decided to file my taxes with a
specialist. I watched him e-file them on February 21st. A day
later, the IRS contacted him to tell him that my tax return had
already been filed again.
I once again went through the same process as the year
before and compiled all of my paperwork. I called the IRS. They
told me I should have an alert on my file because there was an
identity theft indicator on my 2010 and 2011 tax returns. I
asked who it was that filed my taxes in 2011 and 2012 and who
let this year's filing slip through. There has to be a record
who filed them. She could not tell me.
I later spoke with another woman at the IRS who told me it
was my own fault that I had not received my refund and that I
should have received a letter in the mail with my caseworker's
name on it. When I told her to please reissue the letter
because I never received it, she said it could not be reissued.
She was quite angry with me and made me feel stupid and
small because she said I was just one of many people dealing
with this same problem. I was near tears on the phone.
Finally, a different woman from the IRS reached out and
asked me to call her back at ``12ish Mountain Time.'' I could
not because I was at work. She said that if she did not hear
from me, she would close my case. I spoke with another person
in her office and asked for the woman to call me back, and I
have never heard anything.
I reached out to the Federal Trade Commission again and the
State Attorney's Office. They said there was nothing they could
do. I even reached out to the FBI. They told me they do not
deal with identity theft-related tax cases.
I reached out to news stations and have been interviewed
for stories. I have called members of Congress. Senators Nelson
and Rubio have responded to me, and Senator Nelson's office is
the first time anyone has legitimately offered any assistance.
I received a letter at the end of March this year from the
IRS that they have verified my claim of identity theft for my
2012 taxes, that there is an identity theft indicator on my
account, that no further action was needed on my part. But the
letter still did not include an identity protection PIN even
though I was promised one over a year ago.
I am afraid all of this will happen again next year if I do
not get a PIN. I should never have to go through anything like
this, nor should anyone else. I feel violated. It is hard to
concentrate in work. I am stressed constantly and have had to
ask my doctor for help to deal with these problems.
I have no idea how my information got out there. I have
spent a lot of time in hospitals due to my health condition.
So, it is possible my personal information was obtained there.
Because of all this, a stranger knows more about me than my
friends and family. I hope you can do something to stop this.
Thank you for this opportunity to share my story, and I am
happy to answer any questions you may have.
[The prepared statement of Ms. Hossli follows:]
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The Chairman. Well, I hope we can do something about this
very sad tale of woe that you have brought to us. I hope we can
do something about it today.
In the second panel, we will have the IRS and the Treasury
Department; and they have taken note of what you have just
said; and at the conclusion of this hearing, I would like to
see both Treasury and IRS and you, Ms. Hossli, in the ante room
and let us see if we can start trying to solve her problem.
Before you all come up to testify, if you would start e-
mailing whoever you need to check on this, I sure would
appreciate it.
All right. Now, we have got Detective Sal Augeri. Have I
pronounced that right?
Mr. Augeri. Yes, sir.
The Chairman. Sal Augeri. He is in the Criminal
Intelligence Bureau of the Tampa Police Department. He has been
working as one of the IRS's identity theft task forces to go
after these criminals. Share with us.
STATEMENT OF SAL AUGERI, DETECTIVE, CRIMINAL INTELLIGENCE
BUREAU, TAMPA POLICE DEPARTMENT
Mr. Augeri. Mr. Chairman, members of the Committee, good
afternoon.
On behalf of the City of Tampa, Mayor Bob Buckhorn and
Chief Jane Castor of the Tampa Police Department, I am
Detective Sal Augeri and I would like to thank you for inviting
me here today to testify before your committee regarding
identity theft and specifically Stolen Identity Refund Fraud.
Last March of 2012, I appeared before Senator Nelson to
explain how rampant identity theft was in Tampa and the
surrounding bay area. We were experiencing a crime wave that
was unknowingly funded through hard working taxpaying
Americans. ``Turbo Tax'', as it was commonly known among the
criminals, was spreading throughout Tampa, the surrounding
counties, and the State of Florida at an alarming rate, that
estimates of the dollar loss were into the hundreds of
millions, if not billions.
The City of Tampa would later be identified as ``Ground
Zero'' for this crime. Throughout the later part of 2010 and
the first half of 2011, law enforcement could not develop a
uniform approach to combating the crime, solicit the necessary
help of the Internal Revenue Service Criminal Investigations or
come to some type of consensus on the prosecution of these
cases between the U.S. Attorney's Office and the Hillsborough
County State Attorney's Office.
During this time, local and state law enforcement had very
little, if any, joint cooperation with enforcement efforts from
IRS-CI. As many of us would later learn, disclosure laws
protecting the sharing of tax information basically
``handcuffed'' IRS-CI and therefore the joint sharing of
information could not take place.
Due to the many enforcement and prosecution issues,
criminals continue to make a large sum of money from tax fraud
all in the face of law enforcement. After the successful
operation headed by the United States Secret Service in
September of 2011, Operation Rainmaker brought the problem to
the attention of mainstream America and especially to the
residents of Florida.
With that, it also brought the problem that law enforcement
was having dealing with this crime to the forefront. Among
them, a need to unify efforts between local, state and federal
law enforcement officials, the ability to share critical
information needed for establishing evidence that was crucial
for a successful prosecution and a means to utilize that
information for introduction into a state or federal judicial
system.
Following the hearings in March of 2012, IRS-CI introduced
the new ``Waiver Pilot Program'' for the Tampa Bay Area. With
that came the arrival of Special Agent in Charge, James Robnett
and Assistant Special Agent in Charge, Ismael Nevarez.
Significant positive changes began and IRS-CI became the
focal point in bringing local, state and federal agencies
together to combat this crime. The ``Alliance Group'' was
formed in July of 2012, and it consisted of the Tampa Police
Department, Hillsborough County Sheriff's Office, Polk County
Sheriff's Office, Pasco County Sheriff's Office, Pinellas and
Manatee County Sheriff's Office, the Florida Department of Law
Enforcement, the United States Secret Service, FBI, United
States Postal Service, the Hillsborough County and Polk County
State Attorney's Offices, Office of the State Wide Prosecutor
and the U.S. Attorney's Office for the Middle District of
Florida.
This collective effort is overseen and coordinated by the
Internal Revenue Service-Criminal Investigations. The ``Waiver
Program'' introduced a format that allowed victims to sign an
IRS form which would enable local law enforcement authorities
to request a copy of the fraudulent return that was submitted
and accepted by the IRS.
This information allowed law enforcement to continue with
their investigation, obtain critical and vital evidence and
subsequently lead to either federal or state charges being
brought against the known suspect committing the crime.
In addition, the Department of Justice Tax Division along
with IRS-CI streamlined their processes which have resulted in
a quicker ``turn around'' of these financial investigations.
With this, the U.S. Attorney's Office has been able to
expeditiously bring charges against these suspects and receive
a final resolution within the court system.
Recently, the successful federal prosecution of Russell
Simmons, a Tampa used car salesman and convicted drug
trafficker, highlighted the enormous problems associated with
this type of crime. The Simmons investigation began in the
early part of 2011, involved a search warrant of his business
on August 31, 2011 and his arrest for a state charge of
Identity Theft and Credit Card Fraud.
The investigation continued for many months due to the
obstacles in place at that time. Federal charges were
eventually brought against Simmons and he was indicted in May
of 2012. This was a multi-agency effort and it was comprised of
the Tampa Police Department, the United States Secret Service
and IRS-CI which culminated in Simmons pleading guilty in
November of 2012 to identity theft related charges.
The investigation found that prior to his arrest in August
2011, Simmons had attempted to defraud the U.S. Treasury of
$8.9 million and he ultimately received $1.7 million. Simmons
was sentenced on March 18, 2013 to 15 years in federal prison,
a sentence which has resonated throughout Tampa and the Bay
Area.
Given the close coordination between IRS-CI and the
Alliance partners, the Russell Simmons investigation would move
much faster today. All identity theft leads are brought to the
Alliance Group and there is immediate coordination and sharing
of intelligence. Joint investigative actions are taken,
resources are shared, evidence is gathered and quick arrests
are made.
Our local Crime Stoppers is also part of the effort and
tips from Tampa Area citizens go directly to the Alliance
members. The Alliance Group concept has resulted in many more
prosecutions this year than last year.
Some of the recent prison sentences handed out by the
Federal Court of the Middle District of Florida include Remesa
Buemer, 65 months prison, Danielle Denson, 76 months prison and
most recently, the ``guilty'' pleas entered by Rashia Wilson
and Maurice Larry whose names are synonymous with tax refund
fraud.
These cases are a direct reflection of U.S. Attorney Robert
O'Neill's office and their commitment to this fight. Chief
Castor and the Tampa Police Department are committed to their
law enforcement counterparts that comprise the ``Alliance
Group'' and we are part of their recently appointed Task Force
Officers assigned to the Internal Revenue Service Criminal
Investigations.
I sit here before you as a Deputized IRS Task Force
Officer, with expanded jurisdictions, federal authorities and
on a daily basis, I work alongside the IRS-CI Special Agents
investigating identity theft related tax fraud cases.
Within the Tampa Bay Area, outreach efforts through SAC
James Robnett's office with local banks has streamlined the
expedient detection and recognition of fraudulent tax refund
deposits and the subsequent seizure and return of stolen tax
payer money to the U.S. Treasury.
Although this crime is still prevalent and lucrative to the
criminals that engage in it, law enforcement efforts have had
positive changes. Sources on the street have told me of the
increased police effort and that it is more difficult to get
returns back from the U.S. Government.
The Chairman. Detective, we need you to wrap up.
Mr. Augeri. However, this problem cannot be solved by law
enforcement alone. Two other efforts need to be made on the
initial filing through the Internal Revenue Service and through
parent companies credit card programs, and a second initiative
of maintaining and securing personal identification.
I believe our 2013 collected enforcement efforts have never
been better and I foresee a continued positive progression with
that endeavor.
Thank you.
[The prepared statement of Mr. Augeri follows:]
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The Chairman. Thank you, Detective Augeri.
I have conferred with Senator Collins and we are going to
do something different here. I am going to ask our next two
witnesses if you would just pull your chairs up to the table.
If our assistant could assist to rearrange the table, Senator
Collins and I feel like that the testimony of all would be very
helpful here and then I am going to turn to our Committee
members first for your questions, and I will just wait until
last. All right.
First, we are going to hear Ms. Keneally. She is the
Assistant Attorney General for the Tax Division of the United
States Department of Justice. Ms. Keneally's division works
with the IRS and regional district attorneys to prosecute tax
fraud.
Then, we are going to hear from Russell George. He is the
Treasury Inspector General for the Tax Administration at the
U.S. Department of the Treasury.
The Inspector General has conducted some of the most in-
depth research on identity theft related tax fraud bringing to
light the cost of the fraud to the federal budget and the
shortcomings of IRS in resolving these cases.
As I said earlier, we are arranging to bring the IRS down
here so that, Ms. Hossli, we can have a meeting between you and
them after this hearing.
So, let me turn first to Ms. Keneally.
STATEMENT OF THE HONORABLE KATHRYN KENEALLY, ASSISTANT ATTORNEY
GENERAL, TAX DIVISION, UNITED STATES DEPARTMENT OF JUSTICE
Ms. Keneally. Chairman Nelson, Ranking Member Collins, and
members of the Special Committee, thank you for the opportunity
to appear before you this afternoon to discuss the Department
of Justice's efforts to combat tax refund fraud arising from
identity theft.
Before I address my prepared comments, I would like to
confirm that I have sent an e-mail to the Acting Commissioner
of the Internal Revenue Service and to his counselor raising
Ms. Hossli's issues. We will absolutely follow up with that.
The Chairman. Thank you very much.
Ms. Keneally. The Department greatly appreciates the
commitment that the Chairman, the Special Committee, and the
staff have brought to this important issue. Combating the
illegal use of social security numbers and other personal
identification information to file fraudulent tax refund claims
is a top priority for both the Division and U.S. Attorneys'
Offices across the Nation.
Your efforts to bring attention to this fast-growing and
insidious crime will help educate taxpayers about the
importance of detecting and reporting identity theft and tax
fraud and will send a strong message that their schemes will be
detected and prosecuted to the fullest extent of the law.
The Department of Justice's Tax Division, which I have the
privilege of leading, has one purpose: to enforce the Nation's
tax laws fully, fairly, and consistently, through both criminal
and civil litigation.
The Nation-wide reach of the Tax Division's centralized
criminal tax enforcement facilitates the government's ability
to respond efficiently and forcefully to often-changing
patterns of wrongdoing.
The recent explosion in the use of stolen social security
numbers and personal identification information to file
fraudulent tax refund claims is an example of this type of
challenge.
Stolen identity refund fraud has been described fairly well
by the Chairman and the Ranking Member in your opening
comments. While it can be described fairly simply and
straightforwardly, it has been our experience that it is often
implemented through complex multi-step and multilevel themes
and schemes that cross state lines and span the country.
The low physical risk and high potential for financial gain
has made stolen identity refund fraud a crime of choice for
drug dealers and gangs.
Too often, the most adorable members of our communities,
the elderly and the infirm, have become victims when their
identities have been stolen at nursing homes and hospitals.
And as has also been mentioned today, the pain of grieving
families has been increased through the use of information
taken from public death lists, and Postal workers have been
compromised, robbed, and in one instance murdered to gain
access to refund checks.
While the IRS will make good on any refund that is due to
the taxpayer, as we have heard today, there are unfortunately
inevitable burdens while this is sorted out and the victims
often feel a profound sense of violation again as we have heard
today. Most fundamentally, all honest tax payers are victimized
by the loss to the Federal Treasury.
The Department and the IRS have devoted significant
resources to address the stolen identity refund fraud. We have
successfully prosecuted a large number of cases resulting in
lengthy prison sentences and substantial fines and forfeitures.
The first six months of this fiscal year the Tax Division
has authorized more than 275 SIRF investigations involving more
than 500 suspects across 37 states, the District of Columbia,
and Puerto Rico.
In many cases, the SIRF crime was first uncovered by local
law enforcement who discover the Treasury checks and debit
cards. Recognizing that there are fast-moving law enforcement
needs in such cases, the tax division issued Directive 144,
which was the result of collaborative efforts among the Tax
Division, the Internal Revenue Service, and the U.S. Attorney's
Offices.
Directive 144 streamlines the initiation of SIRF tax
prosecutions in authorizing U.S. Attorney's Offices to open tax
related grand jury investigations in SIRF matters to bring
complainants against those involved in SIRF crimes and to
obtain seizure warrants for forfeiture of criminally derived
proceeds arising from SIRF crimes, steps that require prior
authorization from the Tax Division for other tax crimes.
Simultaneous with the issuance of Directive 144, the Tax
Division also implemented expedited procedures by which the Tax
Division committed to review a request to indict within three
calendar days in fast-moving, reactive SIRF cases.
While providing for expedited procedures, Directive 144
serves a second law enforcement purpose, specifically the
centralization of knowledge about SIRF crimes through the
reporting of information by the U.S. Attorney's Offices to the
Division and the IRS.
This enables prosecutors and law enforcement agencies to
work together to identify schemes and to pursue the most
culpable schemers. It also aids our efforts to give the IRS
real-time information so that the IRS can work to stop the
crime at the door through improved filters as well as to
address the needs of victims quickly and effectively.
The prosecution of SIRF crimes is a national priority; and
together with our law enforcement partners, we will continue to
look for the most effective ways to bring this conduct to an
end and to punish the wrongdoers.
Thank you again for all that you have done and for the
opportunity to provide the Department's perspective on this
issue, and I look forward to answering any questions you have.
[The prepared statement of Ms. Keneally follows:]
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The Chairman. Thank you. All right.
Mr. George, tell us what the IG has done and just avoid
repetition of stuff that has already been put before the
Committee.
Of course, each of your written statements will be entered
into the record.
Please proceed.
STATEMENT OF HONORABLE J. RUSSELL GEORGE, TREASURY INSPECTOR
GENERAL FOR TAX ADMINISTRATION, UNITED STATES DEPARTMENT OF THE
TREASURY
Mr. George. Thank you, Mr. Chairman.
Chairman Nelson, Ranking Member Collins, and members of the
Committee, again thank you for the invitation to provide my
views on the topic of tax-related identity theft.
As the Inspector General for Tax Administration, commonly
referred to as TIGTA, I represent an organization dedicated to
protecting the integrity of our Nation's $2 trillion tax
system.
The title of this hearing appropriately characterizes the
problem as an epidemic confronting all taxpayers and especially
senior citizens. As noted, our audits have documented alarming
growth in the problem of identity theft tax fraud.
TIGTA has provided ongoing oversight of the issue because
of the rapidly growing nature of this tax crime, its
consequences for victims, and the need for further improvements
in the IRS's handling of identity theft.
As was noted, the number of identity theft cases have
continued to rise since 2011. As of December 31 of last year,
the IRS identified almost two million identity theft incidents,
and it is very likely that the number of identity theft cases
will grow during the current filing season.
Last summer, my organization, TIGTA, reported that the
impact of identity theft on tax administration is significantly
greater than the amount the IRS detects and prevents during the
filing season.
Using data available after April 15, my auditors identified
an additional one and a half million tax returns that the IRS
had not identified, with potentially fraudulent tax refunds,
totaling in excess of $5 billion.
If not addressed, we estimate that the IRS could issue
approximately $21 billion in fraudulent tax refunds resulting
from identity theft over the next five years.
Unfortunately, as you pointed out, Senator, and it is so
important that I will repeat this, senior citizens are highly
vulnerable to identity theft tax fraud. For tax year 2010, as
you pointed out, we identified over 76,000 tax returns filed
using the identities of older Americans, again, that
characteristics of IRS-confirmed identity theft cases. These
tax returns resulted in fraudulent tax refunds in excess of
$370 million.
Last year, we evaluated whether the IRS is effectively
providing assistance to victims of identity theft. We found
that the IRS's procedures are not adequately communicating
identity theft policies to taxpayers. Unfortunately, this
results in an increased burden for the victims of identity
theft which is the last thing a victim of identity theft needs,
as evidenced by Ms. Hossli.
As Ms. Hossli described, identity theft takes an enormous
financial and emotional toll on its victims. When a taxpayer's
identity has been compromised and tax return information
falsified, the taxpayer needs immediate assistance. What they
want and what they need is an identity theft hotline at the
IRS.
Instead, identity theft victims get the equivalent of the
runaround when they contact the IRS seeking assistance. Our
report found that customer service is highly problematic for
identity theft victims.
The audit also found that taxpayers whose identities are
stolen receive confusing and conflicting instructions from the
IRS and many times delays of, as you pointed out, longer than a
year occur to resolve the tax problems resulting in an
increased burden for the victims.
The growth in these cases has overwhelmed the IRS's
resources and burdened taxpayers. TIGTA has made a number of
recommendations to address these issues. The IRS, to its
credit, has agreed to many of them, and we will be following up
with an audit to evaluate their progress later this year.
Thank you, Chairman Nelson, Ranking Member Collins, members
of the Committee. I also look forward to responding to whatever
questions you may have on this subject.
[The prepared statement of Mr. George follows:]
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The Chairman. Okay. There you have it. Senator Collins and
I want the members of the Committee to get into it.
Senator Collins
Senator Collins. Thank you, Mr. Chairman. It is typically
gracious of you to allow us to go first.
Ms. Hossli, I listened to your testimony with a sense of
disbelief and outrage not only have you been scammed
repeatedly, I think three years in a row counting this year,
and I see you are nodding yes. But the treatment that you
received from the IRS is so disturbing and unacceptable as you
sought help.
Can you give us any idea of how many different IRS
employees you have talked to as you tried to get help over the
last three years?
Ms. Hossli. Dozens.
Senator Collins. Literally dozens. I guess am outraged by
that, and it speaks to the point that Mr. George just made
about there being a need for some sort of central hotline or
clearinghouse where you could go.
The PIN program that has been described that IRS has
implemented is intended to protect people like you who have
been victimized repeatedly. Have you received a PIN number yet?
Ms. Hossli. No, ma'am.
Senator Collins. No. So, despite the fact that you have had
your refund which you desperately need to help pay your medical
bills, you have had this happen three times, you still have not
received your PIN number, is that accurate?
Ms. Hossli. No, ma'am. That is correct.
Senator Collins. Mr. George, I just do not understand what
is going on at IRS and I hope that you can help us understand.
I know that the National Taxpayer Advocate has been concerned
that the IRS is moving away from a previous effort to
centralize customer service in response to identity theft cases
like the one that Ms. Hossli as described; and now, it
apparently is going to create units in 21 different places. Is
that accurate?
Mr. George. That is accurate in terms of the number of
various divisions within the IRS that had a role or still have
a role to play in identity theft. To its credit, the IRS has
attempted to consolidate their activity as it relates to
identity theft so that an individual can go to a single office
within the IRS. But in this current economic environment,
Senator, they have to make some tough choices.
Senator Collins. Well, it seems to me this is a perfect
example where consolidation makes sense. You ought to be able
to bring the existing resources that you have in 21 different
units together in one unit so that each person who calls would
deal with knowledgeable people, not get different answers, not
be told to call back at 12-ish mountain time and nobody
answers.
Would that not help to consolidate?
Mr. George. There is no question about that, and my office
will be conducting a review of this activity.
Senator Collins. Thank you.
Ms. Keneally, I understand that the Tax Division has issued
a directive, number 144--you referred to it, the detective has
referred to it--to address stolen identity refund fraud.
It is supposed to improve coordination between the Tax
Division and the U.S. Attorney Offices all over the country.
That is a positive development without a doubt.
But I guess what I do not understand is given the number of
hearings that Senator Nelson has held and given the fact that
the National Taxpayer Advocate has identified identity theft as
one of IRS's most serious problems, six times since 2004, why
did it take so long for the Justice Department to issue this
directive and to delegate more authority in this area?
Ms. Keneally. Senator Collins, thank you for that question.
I may not be able to answer that question. I was sworn in
to a year ago and we issued the directive in September. At the
time that I arrived, there were active discussions between the
IRS and prosecutors in my office as to how to address this
issue; and as far as I know, we moved as quickly as we could
and as collaboratively as we could to address this issue.
The directive in many ways reflects how we were handling
these cases. In any case, it formalized it and put structure
around what we were doing because this was a fast-growing and
fast-moving crime. It is my understanding that the Tax Division
and the U.S. Attorney's Offices were responding quickly.
Senator Collins. Well, I hope that you really make this a
priority.
Thank you, Mr. Chairman.
The Chairman. Senator Warren.
Senator Warren. Thank you very much, Mr. Chairman, and
thank you for your persistent and aggressive leadership in this
area. Thank you and Ranking Member Collins for holding this
important hearing today.
I also want to thank Ms. Hossli for coming up. I know this
is difficult telling your story, how much we all appreciate
your being here and trying to prevent this from happening to
other people. Thank you very much for being here today.
Detective Augeri, I wanted to ask you a question. It sounds
like from what you are describing in Tampa that basically it
was really hard to get anything together. You have got a
coordinated effort and a coordinated effort was much more
effective. In other words, smarter policing. And, I offer my
congratulations on that.
But there was another aspect that you mentioned in your
testimony that I want to ask about and that is the importance
of information from victims and from residents in the area. Can
you just say something more about how important that is to your
ongoing investigations?
Mr. Augeri. The biggest problems that we are experiencing
right now is the fact that Personal Identification Information,
PII, is being sold in such large quantities that is fueling
this crime.
It does not appear to have any safeguards in place for
these companies that are responsible for protecting this
information because the people that are dealing this
information it is just like they are dealing cash because that
has a dollar value, a name, a social, a date of birth. Without
that abundance of information out there, this crime gets
dramatically reduced along with all kinds of other fraud
activity.
Senator Warren. And you hear about these when people call
you or call the task force with their own cases like Ms.
Hossli's of identity theft?
Mr. Augeri. When we get those complaints, obviously they
are a victim of their own information being stolen. What we are
seeing from the enforcement side is the interdiction part where
arrests are made and these quantities of personal
identification information are seized, and these people have
access to this information through typically medical
connections.
Senator Warren. Thank you. The reason I asked about
individuals, I actually got some data on this that 150 million
calls were made to the IRS last year and only 68 percent were
answered. Ten million letters were received by the IRS but one
million received no answer from anyone.
And, the taxpayer protection program received 200,000
identity theft calls but only 73,000 of those calls were
answered, about a third of the calls actually had someone who
answered them which means the information about identity theft
is clearly not fully in the system.
So, I am just concerned about this and I want to put that,
when I look at the Chairman's chart, to think about how much
bigger it might be if we had full information here.
Ms. Keneally, I wanted to ask you a question. It is my
understanding that for every dollar spent in tax fraud
enforcement that the return to either the U.S. Government or to
the taxpayer is $4, is that right?
Ms. Keneally. Thank you for that question. If you look at
the numbers of the Tax Division's collections and money saved
in defending against refund claims over the last five years
that number averages 14 to 1.
Senator Warren. Sorry. So, I had the wrong number. I will
stand corrected.
Ms. Keneally. And that is without considering our criminal
enforcement which we really cannot want to quantify in dollars.
Senator Warren. That is right. And it is not considering
the heartbreak that someone like Ms. Hossli goes through when
her identity is stolen.
Ms. Keneally. Which is what drives us.
Senator Warren. Yes. So, I think about this in the context
of sequestration, that right now we are furling workers,
halting research, taking children out of head start. The
sequestration costs $85 billion this year. The IRS estimates,
as I understand it, that there is about $400 billion left on
the table that is not collected, money that is fraud or deceit
in other ways, about 21 billion of that I think the estimate is
through identity theft.
So, here is my question. The IRS is facing an 8 percent cut
in its budget. Can you just say something briefly, I am about
to run out of time here, about whether the sequestration is
making it harder for the IRS to recover money for the American
taxpayers and for Ms. Hossli?
Ms. Keneally. Senator, thank you for that question. I know
on this issue in particular this morning I saw in today's tax
press that the Acting Commissioner said that he will not cut
resources on the identity theft issue.
I think there is no doubt the IRS and all of law
enforcement will need to make some difficult decisions. The
Attorney General has stated that we will need to make difficult
law enforcement decisions in the Department of Justice, and I
am certain the IRS will be facing the same decisions. We will
continue to make identity theft a priority.
Senator Warren. I appreciate that you make identity theft a
priority; but as we think through this question of how we fund
our government, and we are leaving $400 billion on the table
every year in tax fraud, the idea of cutting enforcement for
the IRS just seems to me not to be serious about collecting the
money we need to run the government.
So, the next time I hear that the government is broke I
will ask that you get the money you need to enforce our laws.
Thank you.
Ms. Keneally. Thank you, Senator.
The Chairman. Senator McCaskill.
Senator McCaskill. Thank you, Senator Nelson. Thank you all
for being here.
I want to first share of what I know. You will be
diplomatic about this, detective; but having been a local
prosecutor for many years, nothing is more frustrating than
when you have a red-hot crime and you hear from the Feds,
sorry, we cannot share because of blah blah blah blah blah.
And it is always a good different reason as to why we
cannot share blah blah blah blah. But I know in this instance
sharing is pretty important because for a while you were
stymied by the notion that you were unable to get information
because the IRS said that it was private taxpayer information.
Now, you got them to acknowledge a waiver program, and we
get waivers all the time in our Senate offices to help people
with various problems they have with Social Security or
veterans benefits. We get waivers so we can act on their
behalf.
Do you sense now, and maybe the Inspector General can speak
to this, is the acknowledgment that a waiver by the taxpayer
that is the victim, that that is sufficient to get the Criminal
Investigation Division of IRS outcome neutral and fully engaged
in going after this?
Mr. George. Yes, Senator, that is the case. We take
particular pride in helping Congress and helping the IRS get
through Congress authorization to share information initially
as it related to prisoners. You may recall from a few years ago
we did work which uncovered again an epidemic of people who
were incarcerated filing false tax returns and receiving tax
refunds.
As a result of that, the IRS instituted a pilot, starting
with Florida, which expanded to eight other States, and now it
is throughout the entire Nation. So, as a result of that,
additional information is being shared with law enforcement
agencies.
Title 26, Section 6103 puts criminal penalties on me as
well as the members of Congress, with the exception of the
Chairman of Finance, Ways and Means, and a couple of other
Committees, on how taxpayer information can be used with the
caveat that you are exactly right, if a taxpayer allows someone
other than themselves to have access to that information, it is
permissible.
Senator McCaskill. Right. The waiver is very important.
Well, I am glad that it is now no longer on a pilot basis and
it is all over the country so we can get the cooperation
needed.
Well, now the IRS has an obligation that clearly they are
not meeting and they should not be a crime that is only
identified by people like poor Ms. Hossli coming forward. This
needs to be a crime that is identified through systems.
When you have, it is my understanding that we had, in one
instance we had, how many thousands of checks were sent to one
address in Michigan? Two thousand paper refunds sent to one
address.
Could you explain--I am disappointed, and I want to help
you, Mr. Chairman, get the IRS here. I do not know why the IRS
is not here. They need to be here. It is inexcusable that they
are not here, and I hate to blame the Inspector General for
this.
But how in the world can there not be a system in place
that the IRS would catch? They were sending 2000 refund checks
to one address.
Mr. George. Senator, once again, we actually take credit
because we identified that problem, that is, Treasury Inspector
General for Tax Administration. In their defense, the Internal
Revenue Service needs a statutory fix in order to limit, at our
request, our recommendation, the number of returns that are
issued to the same bank account, debit account, what have you.
Senator McCaskill. No. You have got to be kidding.
Mr. George. Well, they do and----
Senator McCaskill. No. Wait, wait. You are telling me that
there needs to be a statute to tell the IRS that they need to
get their criminal investigation involved if they are sending
2000 refund checks to one address?
Mr. George. Well, not, the criminal, no, they can
investigate.
Senator McCaskill. Well, that is what I am saying. I mean,
it would be a little bit like if I was running a store and all
of a sudden I realize that half my shelves were empty, would I
have to wait for somebody to do an inventory to tell me I have
a problem?
I mean, if somebody is stealing stuff, it seems to me that
when the IRS sees, they should have some kind of system check
that went 2000 checks are going to one address that they would
go, huh, do you think somebody is ripping us off? Do you think
we maybe ought to check that address and see what is going on?
Mr. George. Senator, that is a very logical reaction; but
again, and I am not going to defend the IRS, but when I had
discussions with my own staff about this very situation, I
raised the possibility, well, could these be accountants, could
this be an H&R Block and in effect having an escrow account for
clients, and is this a possibility? And while I have been told
for the most part that is not the case, but that was one of the
considerations.
Senator McCaskill. But do you not think, I mean, frankly I
think if you called the local police department in Lansing, I
bet if the IRS Criminal Investigation Division called you,
detective, and said, you know, we have got an address that we
have sent 2000 checks to. Could you help us out?
I guarantee you the local detective would go, yeah, we will
check it out. And, do you know what they would do? They would
go over there, they would scope it out, they would do a little
investigation, they would figure out what was going on, and lo
and behold, you know what they would do? They would catch a
criminal.
Mr. George. And fortunately, again as a result of our work,
that has occurred.
Senator McCaskill. So, now when there is 2000 checks going
to one address, does it trigger some kind of work by the
criminal investigations division?
Mr. George. It should, but again, they have limited
resources, Senator, I do not know exactly how they allocate
their resources and make the determination.
The IRS has a tolerance level as does the U.S. Attorney's
Office. Again, they are dealing with hundreds of millions of
tax returns a year, trillions of dollars a year, and they----
Senator McCaskill. Yes, but there are basic systems that
could be put in place that would trigger basic questions being
asked and it would not be, especially in this age of
technology, it would not be an onerous requirements and we will
continue to follow up on this. I really appreciate the
Chairman. If I were the IRS, I would be embarrassed about this.
Thank you, Mr. Chairman
The Chairman. The IRS is going to have a chance to explain
all of this as they did two years ago in a Subcommittee that I
chaired in Finance. That is going to be another hearing coming
up on 16th of April in the Finance Committee, which has
jurisdiction over the IRS.
One of the issues in front of the Committee at that time
will be the legislation that is filed that I would encourage
the members of the Committee to sponsor, and I am very proud of
this Committee just by what you have seen. We have got a bunch
of bulldogs on this Committee which is, it is just a privilege
to be a part of it with you all.
Senator Donnelly.
Senator Donnelly. Thank you, Mr. Chairman.
To follow up on what my colleague was talking about, and,
Ms. Hossli, thank you for being here. Detective, thank you for
your hard work and thank you to the other witnesses.
I am not a software expert but it would seem to me that,
you know, this would be something having 2100 go to the same
address that it would clearly collect that there is a problem
and that a simple software feature could detect that
immediately to Mr. George or to Ms. Keneally.
Am I heading down the wrong road with that?
Mr. George. We first recommended in 2008 that the IRS limit
the number of refunds that they submit to the same account.
They indicated that in some instances it was legitimate. Again,
and I will have to allow them to speak for themselves to
explain that justification.
They have instituted filters, in effect software, an
algorithm, to help determine when things are suspect. They are
aware of the problem, but it is a growing problem.
This is the problem of the 21st century, Senator, and it is
not limited to the United States. It is an international
problem. So, they need cooperation from nations all over the
world. As you know, in this environment there are nations that
are not going to cooperate with us.
Senator Donnelly. Do you know, and again to Ms. Keneally or
to Mr. George, is there some kind of feature that can make it
so that the IRS knows it is, in fact, this person who sent the
return whether it is a PIN number as Ms. Hossli was talking
about, a simple feature like that, a 10-, 11-, 12-digit PIN
number or a mix of numbers and alphabetical letters to know
that, if I file my return in April, somebody with the
appropriate number, is there a way to do that?
Mr. George. Is there a way? Yes.
Senator Donnelly. Okay.
Mr. George. But the absurdity, Senator, of all of this is
the IRS has to rely on information provided by the taxpayer.
So, if a criminal takes over the identity of an honest
taxpayer, especially someone who does not have a filing
requirement----
Senator Donnelly. And they would really need to know would
be the Social Security number and the address?
Mr. George. But the irony is the criminal can change the
address so that the IRS communicates with the criminal and not
with the legitimate taxpayer.
Senator Donnelly. So, if all you have is a Social Security
number and a person's name, you can file a tax return for that?
Mr. George. That is correct. And you do not actually even
need a Social Security Number. The IRS issues what is called an
ITIN, an Individual Taxpayer Identification Number. This is for
people who do not have Social Security Numbers and yet have a
tax filing obligation.
Senator Donnelly. And the whole idea is to try to be the
first in the door?
Mr. George. Exactly, which was pointed out by the Chairman
earlier. Yes.
Senator Donnelly. Detective, is this something that--you
indicated Tampa is ground zero. Is this something that in Tampa
different groups work together with each other in coordination
that, hey, this is the system we have used. It has really
worked well to get us additional funds; and then another group
uses it? And has it become, in effect, almost a learning center
for the entire country or do they coordinate, these groups?
Mr. Augeri. They do coordinate. They network. If there are
submissions that are being sent and being rejected, once a new
scheme is set up, they kind of share that information so they
can get the submission accepted by the IRS.
Senator Donnelly. Ms. Keneally, is there any screen or
system that you have that can determine that that return is, in
fact, from that taxpayer when it comes in?
Ms. Keneally. Senator, I am with the Department of Justice
and we prosecute after the crime occurs.
Senator Donnelly. Yes.
Ms. Keneally. I do know that we make every effort to make
sure that the IRS gets the information that we have. When we
are prosecuting these cases and we have a list of victims, we
make sure that the IRS has that information to tag those
accounts.
I will reiterate. The IRS is working constantly on its
filters. We try to get them the information they need
concerning the patterns that we are seeing and they have their
own fraud development centers on patterns.
We make every effort to try to prevent what happened to Ms.
Hossli that if someone is the victim in one year that
everything is tagged so they will not be a victim in future
years.
Senator Donnelly. Mr. George, do you know of any way that
the IRS can verify this return, in fact, came from that
taxpayer?
Mr. George. There are a number of ways that it can be done,
sir, but if I may again just jump to something that the IRS
itself has requested for years, and we at TIGTA have
recommended, if the IRS were able to gain access to what is
called the National Directory of New Hires, which is maintained
by the Department of Health and Human Services, which in effect
is a very complete index of individuals who start or at least
claim to have started new jobs. If the IRS were able to compare
the information about who claims to have a job with the
information that is subsequently submitted to it in terms of
what amount of money they are supposedly earning and the like,
that matching of information would significantly assist the IRS
in addressing this type of problem.
Senator Donnelly. I want to thank the entire panel. Thank
you for your attendance here, and thank you, Mr. Chairman.
The Chairman. Any of you who have any follow up, I am going
to wrap up here pretty quick and I just point out to the
Inspector General that, as you share with IRS and I will
certainly do this in the hearing coming up on tax day, middle
of April, that many companies always verify a change of
address; and so, since the fraudster can just say, well, change
my address to a new address and the IRS is not verifying that,
then it just lends all the more to this opportunity.
When you add to that what we heard in the Jamaican scam
where they can send it to one of these cards, a debit card,
then that just makes it all the more difficult to locate and to
identify the fraudster.
And this is where the Tampa Police Department has done such
a great job. First of all, they had to go through all of this
and work it with the IRS to get a waiver so that poor victim
could say I waived my rights, you can share my personal tax
information with the police department so they can go catch the
bad guy. And that is the way they have been able to get it.
And as you said, Mr. George, this first thing started in
the prisons and again it happens for some reason in Florida and
it was prisoners in the State prison system that were filing
false tax refunds and getting the money. And they are in
prison.
And so, what they did was they got the waiver from the
victims and they pretty well snuffed that out in the prisons.
Now, we have got to snuff it out here.
Senator Collins
Senator Collins. Thank you, Mr. Chairman, for holding this
hearing as it is absolutely outrageous.
I agree with your comments, with Senator McCaskill's point
about that the IRS ought to be embarrassed that sending out
thousands of refunds to the same address and that is not
caught, that a victim like Ms. Hossli cannot get a PIN number
to protect her and has to deal with dozens of people at IRS,
none of whom really help you, that just outrages me.
An issue also that we also need to look at is the use of
the Social Security number on Medicare cards that are then
available to all sorts of healthcare providers. I know that for
years we have been told it is too expensive to convert but
certainly from hence forward we could stop using the Social
Security number on Medicare cards.
I just think there is so much that can be done and I really
applaud you for your leadership on this and look forward to
working with you and our other committee members.
Thank you.
The Chairman. Senator McCaskill, Senator Donnelly.
Ms. Hossli. Senator, may I?
The Chairman. Yes, ma'am.
Ms. Hossli. I just wanted to say that I did contact the
Attorney General's Office as well and they said that there was
nothing that they could do. I have a question.
Why is it that every doctor's office you walk into the
first thing they ask you for is your Social Security number.
Why is that not part of HIPAA laws?
Your Social Security number is your identity. It is your
sole and nobody should have access to that number.
The Chairman. I think that is a very legitimate question
and we are asked as citizens to give our Social Security number
in cases over and over that it is not required because it is
just another invitation out there that someone is going to
steal your identity.
Now, Ms. Hossli, if you would come with me after the
meeting, we are going to get you with the IRS and we are going
to see if we can get your problems solved. No one should have
to go through what you have gone through.
And I just want to thank the witnesses. You have been
excellent. I want to thank our Committee members. Your
participation is just extraordinary.
Thank you and the meeting is adjourned.
[Whereupon, at 3:27 p.m., the Committee adjourned.]
APPENDIX
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