Lawmakers addressing a massive tax fraud scheme that could be costing the country billions pressed the Internal Revenue Service to do more to prioritize help for victims and prevent fraudulent returns from getting through the tax system.
"The best way to protect the victim is prevent the fraud in the first place," said U.S. Rep. Todd Platts, chairman of the subcommittee holding the hearing in Washington on Friday.
The crime in which individuals file electronic tax returns using other people's identities to get large refunds has exploded over the past year. Through August, more than 580,000 taxpayers were affected by identity theft this year, according to data released at the hearing by the Treasury Inspector General for Tax Administration, which has oversight over the IRS.
In the Tampa Bay area, a task force involving the Tampa Police Department, the U.S. Postal Inspection Service, the Secret Service and other agencies has been trying to tackle the problem.
Postal officials flagged $100 million in refunds from suspected fraudulent returns over a six month period this year, and estimates could put the crime at $1 billion or more in the Tampa area.
Law enforcement in the Tampa area expressed frustration in not being able to get more information and cooperation from the IRS in Washington to investigate and prosecute suspects. They encountered privacy laws that prevented the IRS from sharing certain information.
At Friday's hearing, an IRS official acknowledged some issues with the way the crime was handled in Tampa.
"We might have had a foot fault in Tampa – admittedly," said Steven Miller, IRS deputy commissioner for services and enforcement. "We are doing better in Tampa and we are taking steps to get better in Tampa."
Miller, who said the IRS has 32 investigations in Tampa, also detailed some of the agency's plans to combat the scheme nationwide.
In 2012, the IRS plans to add about 400 people to help deal with identity theft, add to its screening of tax returns to improve the ability to spot false returns and improve collaboration with software developers to prevent theft, Miller said.
For identity theft victims, he said the agency is aiming to resolve cases faster with additional staff and newly formed special units.
Next week, the IRS plans to start issuing more than 250,000 PIN numbers for identity theft victims. Ultimately, those who believe they are vulnerable to theft because of a lost wallet or other breach may be able to request a PIN, he said.
Rep. Rich Nugent, a former Sheriff from Hernando County, participated in the hearing, although he does not sit on the committee.
He said after the hearing that he was "not overly enthusiastic" with the IRS response and is concerned about accountability in tracking cases and dealing with identity theft victims trying to get their situations resolved.
Victims of this crime have complained of long waits on the phone, difficulty getting information about their cases and delays in getting their "real" refunds.
The IRS came under scrutiny at the hearing by both lawmakers and TIGTA for an inadequate system in reacting to the fraud. In testimony submitted to the subcommittee, TIGTA detailed a "best-case" scenario timeline for a victim that could result in almost a yearlong process to get the case resolved and get a refund issued.
"When it comes to a victim of a crime, we need to make that a priority," Platts said. "And I don't think we're adequately doing that," Platts said.