WASHINGTON – As tax season ramps up, U.S. Sen. Mark R. Warner (D-VA) is asking the Internal Revenue Service (IRS) to be more proactive in preventing and addressing cases of identity theft and taxpayer fraud. New data released yesterday by the Government Accountability Office (GAO) revealed that the IRS issued approximately $5.8 billion in fraudulent refunds during the 2013 filing season – $600 million more than previously estimated.

As Sen. Warner wrote in a letter to IRS Commissioner John Koskinen this week, “Data thieves only need a taxpayer’s name and Social Security Number (SSN) to perpetuate a fraudulent refund. Last year alone, hackers stole more than 6.5 million Social Security numbers.”

Warner’s letter questions whether the IRS could detect and combat fraud by checking taxpayer refunds against employer-provided W-2 data – something the agency currently does not do until July, months after potentially fraudulent refunds have already been issued.

Sen. Warner also pressed the agency on its process for notifying taxpayers and law enforcement when the IRS identifies a case of potential fraud.

“The IRS often uncovers an incident of identity theft before the victim does when a data thief files a fraudulent tax return using a stolen SSN. Unfortunately, the agency has interpreted privacy laws as prohibiting the IRS from warning taxpayers that their SSN may have been stolen,” Sen. Warner wrote. “Senator Johnson and I have introduced legislation to address this problem by giving the IRS explicit authority to disclose certain information to law enforcement in cases of identity theft; however, it is my hope that the IRS will be able to address this administratively and without legislation to help victims of identity theft.”

The full text of Sen. Warner’s letter, which was sent the day before the GAO’s most recent report was released, is below. A PDF of the letter is available here.

February 18, 2015

The Honorable John Koskinen

Commissioner

Internal Revenue Service

1111 Constitution Avenue NW

Washington, D.C. 20224

Dear Commissioner Koskinen:

I write to you with serious concerns about identity theft and taxpayer fraud.

According to a U.S. Government Accountability Office (GAO) report, the Internal Revenue Service estimates that it paid $5.2 billion in fraudulent refunds in the 2013 filing season. Data thieves only need a taxpayer’s name and Social Security Number (SSN) to perpetuate a fraudulent refund. Last year alone, hackers stole more than 6.5 million Social Security numbers.

The IRS often uncovers an incident of identity theft before the victim does when a data thief files a fraudulent tax return using a stolen SSN. Unfortunately, the agency has interpreted privacy laws as prohibiting the IRS from warning taxpayers that their SSN may have been stolen. Senator Johnson and I have introduced legislation to address this problem by giving the IRS explicit authority to disclose certain information to law enforcement in cases of identity theft; however, it is my hope that the IRS will be able to address this administratively and without legislation to help victims of identity theft.

I also have some questions about ways the IRS can be more proactive in preventing and identifying cases of identity theft and preventing tax fraud. For example, the IRS does not check a taxpayer’s return against the employer-reported W-2 data until July – months after potentially fraudulent refunds have already been issued.

I would appreciate your response to these questions on the IRS’s ability to detect and combat fraud:

• Could the IRS move employer W-2 deadlines up so that the information is available to the agency sooner?
• Has your agency considered lowering the e-file threshold for employers to increase the number of e-filed W-2s?
• How would delaying refunds or delaying the start of filing season affect the IRS’s ability to identity fraud? What would the burden be on the taxpayer and on the government?

Thank you. I look forward to reviewing your responses to this letter.

Sincerely,

Mark R. Warner

U.S. Senator