IRS Agrees to Give Identity-Theft Victims Copies of Fake Returns

John Koskinen
IRS Commissioner John Koskinen. Photographer: Andrew Harrer/Bloomberg

The U.S. Internal Revenue Service agreed to give identity-theft victims copies of bogus tax returns filed in their name, following a sharp rise in fraudulent refund requests.

The IRS announced the change in a letter to Republican Senator Kelly Ayotte of New Hampshire, who had called for increased transparency for victims of identity theft.

“We have decided to change our policy regarding disclosure of fraudulent identity-theft returns to victims whose name and SSN the fraudulent return was filed under,” IRS Commissioner John Koskinen wrote in a May 28 letter to Ayotte. He said the agency is putting together the new procedure now. The IRS confirmed the letter and declined to comment further.

Ayotte’s inquiries came after a Bloomberg News article about one identity theft victim’s efforts to learn how much of his personal data identity thieves had included on a return filed in his name. While the IRS legal department allowed sharing such information in certain cases, employees were following a section of the code that said they could face criminal penalties for improper dissemination of personal data.

The IRS said identity thieves had stolen information on 104,000 U.S. taxpayers from the IRS website and used the data to file some 13,000 fake tax returns that cost about $39 million in refunds.

‘Get Transcript’

The thieves had enough personal information on the taxpayers to get past security filters on the “Get Transcript” function on the Internal Revenue Service’s website, according to the IRS. That allowed them to gain access to past tax returns, which contain the information they would need to file convincing fake returns.

About 2.4 million U.S. taxpayers’ names or Social Security numbers appeared in falsified returns in 2013, the most recent year available, according to a March report from the Treasury Department’s Inspector General for Tax Administration. That’s a nearly tenfold increase from 2010, according to the inspector general’s study.

The IRS estimates it paid $5.8 billion in refunds on returns in 2013 that it later determined were fraudulent, and prevented fraud attempts of more than four times that amount.

“Victims of identity theft face significant emotional and financial hardships,” Ayotte said in a statement May 29. “They shouldn’t be left in the dark about the extent of the theft.”

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