The IRS and the federal government continue to look for new ways to address an old problem. Taxpayer-related identity theft proved problematic once again during the most recent tax season. Despite efforts from the IRS to increase security around income tax returns, email phishing increased by 400 percent, and the IRS’s Electronic Filing PIN application fell victim to a data breach in early 2016. 

To address the problem that won’t go away, Congress is turning to legislation. The Senate Finance Committee recently approved the Taxpayer Protection Act of 2016, which includes provisions to address taxpayer identity theft among its many improvements to tax policies and procedures.

Sole Point of Contact

The Taxpayer Protection of Act of 2016 proposes that victims of taxpayer identity theft have one core contact. Currently, taxpayers may have to pursue several different avenues available to them to assist with recovering from identity theft, and the resources do not necessarily work with  one another.

In 2008, the IRS created the Identity Protection Specialized Unit to help identity theft victims. The Identity Protection Specialized Unit has since become the Identity Theft Victim Assistance Organization and works with affected taxpayers to ensure they receive the appropriate refund and have the correct tax return information filed. If the taxpayer is unsatisfied with the services provided by the IRS, he or she may reach out to the Taxpayer Advocate Service, which may then assign the individual an identity theft case manager.

Under the proposal, a sole point of contact would be provided to individuals affected by identity theft. The sole source of contact could be either a team or other group of specially trained employees that would work with the affected taxpayer until the issue was completely resolved. Sole points of contact would be responsible for keeping a complete case history, including maintaining a continuity of records of the actions completed. The group would also provide information about the resolution process to the taxpayer as needed.

Addressing the Phone Scams

IRS phone scams continue to pose a major risk for taxpayer identity theft. Over the past several years, scammers have called taxpayers pretending to be IRS employees and demanding sensitive information to remedy bogus problems with the taxpayers’ filings. The IRS has issued several alerts about the fraud, but taxpayers continue to fall victim to the scheme.

The Treasury Inspector General for Tax Administration (TIGTA) monitors fraud activity and receives reports from individuals affected. A provision under the Taxpayer Protection Act of 2016 would require the TIGTA to collaborate with the Federal Communications Commission and the Federal Trade Commission to release a report of recommended technological solutions to help protect individuals from becoming victims of the phone scams. The report would be required within a year of the Taxpayer Protection Act passing.

ID Theft and Tax Scam Information

To reiterate the recommendations about what taxpayers can do to avoid tax-related identity theft, the Taxpayer Protection Act of 2016 proposal would require the IRS to provide basic information to users of the IRS call center. While users are on hold with the call center (and assuming the taxpayer is not disconnected), the IRS would provide them information about common tax scams, where to report potential tax scam activity and how taxpayers can protect themselves from ID theft and various tax scams. In current practice, the information is not provided through the call center; rather it’s listed in IRS materials and through the IRS website.

Stay Tuned

Although it has been approved by the Senate Finance committee, the Taxpayer Protection Act of 2016 would need to be passed by the House and signed by the President before it becomes law. We will keep you up-to-date on the developments as they occur.

For more information about how you can protect against taxpayer-related identity theft, please contact your local CBIZ tax professional.

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