On September 11, 2015, Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) introduced a bill aimed at combating identity theft and tax rebate fraud. The legislation comes as the Internal Revenue Service (“IRS”) continues to deal with fallout from the announcement back in May that one of the agency’s online systems had been hacked and the data of hundreds of thousands of taxpayers may have been compromised. Cyber-crooks used stolen Social Security numbers and other data to gain access through the IRS’s “Get Transcript” online application to past tax returns, which were then used to file fraudulent returns.
The bipartisan Senate bill would require the IRS to develop guidelines for identity theft refund fraud, require the agency to prepare five biannual reports to Congress on identity refund fraud, increase penalties for misappropriating taxpayer identity in connection with tax fraud, increase electronic filing of returns, and require taxpayers who prepare their returns electronically, but print and file the returns on paper, to file their returns with a scannable code. The bill includes a number of provisions that were a part of Hatch and Wyden’s Tax Refund Theft Prevention Act, which was originally introduced in July 2014.
Chairman Hatch expressed hope that the legislation would “improve the overall security of the refund process” and “enhance the controls used to access private taxpayer information at the IRS.” Passage of the bill is not expected to be controversial, and Senator Wyden stated that he is “confident this is legislation that the Finance Committee can get behind on a bipartisan basis.”
A full committee mark-up of the bill originally scheduled for last week was postponed due to concerns raised by the American Institute of Certified Public Accountants (“AICPA”). While the AICPA acknowledges that the growing amount of fraudulent tax refunds is a problem, it objects to a provision that grants the Department of the Treasury and the IRS broad authority to regulate paid tax return preparers. Once the issue is addressed, the Committee is expected to go forward with a mark-up sometime in the coming weeks.
A Chairman’s mark of the bill can be found here.