[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

=======================================================================

                                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

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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
                              ----------                              
                  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

                              ----------                              


                       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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