IRS Inspector General Warns of Alarming Rate of Identity Theft

Criminals are continuing to file falsified tax returns using other people’s identities to receive tax refunds, Russell George, the inspector general for the Internal Revenue Service, told a U.S. House of Representatives subcommittee.

“Unscrupulous individuals are stealing identities at an alarming rate,” he said today in Washington.

George cited IRS data showing that in 2011, the agency detected about 940,000 tax returns involving identity theft and stopped $6.5 billion in refunds from being issued. The total amount of identity theft is larger than that and unknown.

There is a fundamental tension between the IRS’s goals of processing tax returns quickly and stopping fraud, said Nina Olson, the national taxpayer advocate.

“There is no way around these tradeoffs,” said Olson, who runs an independent taxpayer service department within the IRS.

Steven Miller, deputy commissioner of the IRS, told the House panel that the agency has made progress on identity theft. This year, he said, about 250,000 taxpayers who had identity theft cases from prior years received personal identification numbers that authenticate their identity to the IRS.

“We are not done but we have made real progress in the area,” he said.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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