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Hearing of the Government Organization, Efficiency, and Financial Management Subcommittee of the House Oversight and Government Reform Committee - Identity Theft and Tax Fraud: Growing Problems for the Internal Revenue Service


Location: Washington, DC

irst, I want to take a moment to thank the Subcommittee and especially Chairman Platts and
Ranking Member Towns for the opportunity to speak before you today. Although tax fraud
identity theft is a nationwide problem, I wanted to make the Subcommittee aware of what's
happening in Tampa Bay area and my District.
Recently, the Tampa PD started noticing that many of their most notorious drug dealers were no
longer on the streets. Officers pulled one of their previous dealers over during a routine traffic
stop and discovered massive amounts of prepaid debit cards, ledgers containing Social Security
numbers, and laptop computers in the back of the car.
Though this and similar routine traffic stops and drug busts, Tampa PD discovered a scheme
known as "Turbo Tax." One perpetrator had a ledger containing 100 names of deceased people
and, after investigations, it was discovered that this one man had made well over 1,000 false
returns and had collected $2.4 million.
Tampa PD worked well with local IRS agents and U.S. Attorneys in their investigations.
However, once they went to the D.C. bureaucrats, detailing exactly how the criminals steal the
Social Security numbers, file the fraudulent tax returns, and launder the resulting money, the feds
mostly turned a blind eye to the fraud.
The Tampa PD have explained how the criminals got Social Security numbers. Initially, they
targeted deceased people, filing returns with information they found on websites like . Once they ran out of dead people, they started stealing Social Security Numbers
from living victims. Tampa Police Department has had cases where information was stolen from
nursing homes, schools, and hospitals. Additionally, James Haley VA Medical Center sent
letters to about 200 veterans warning them that their identity had been stolen to file false tax
returns. The VA Inspector General is investigating this case.
Tampa PD also knows how the criminals are filing the returns. The actual fraud is not
committed by an "organized group" but by individuals. The Tampa PD have busted what the
lawbreakers call "Make It Rain Parties," where criminals get together, get a hotel room with
internet access, and file fake return after fake return.
The police know how the money's being laundered. The criminals have worked out deals with
unscrupulous business owners who cash the checks or the debit cards in exchange for a cut of the
money. In Tampa, most of the money seems to be laundered by a select group of high cash flow
businesses including used car dealers and clothing shops. One business alone received
approximately $3.5 million in Treasury money.
How does Tampa PD know all of this? The criminals are telling them.
Even after they've been read their Miranda Rights, the crooks are laying out their entire process
to the cops. They're freely admitting their crimes, because they don't think federal officials will
do anything about it. Unfortunately, it seems the criminals are right.
As a representative from the GAO told the Subcommittee in your June hearing on this issue, the
IRS identified 248,357 incidents of tax-related identity theft in 2010. However, in 2010, the IRS
Criminal Investigative division only had 4,706 investigations total, into all types of fraud. The
IRS and by the Justice Department just say these cases aren't of "sufficient severity" for them to
look into it. Experiences in Tampa show that the lack of action is not reflective of the agents'
desire to prosecute, but the bureaucracy within the IRS and their administrators.
Even more infuriating, other federal agencies are notifying the IRS of this fraud, but they
continue to send the checks. In Tampa alone, the U.S. Postal Service stopped the delivery of an
estimated $100 million in fraudulent refunds in a six-month period. Media reports also say that
the company issuing the prepaid debit cards notified the IRS of fraud concerns. However, the
IRS ignored these warnings and just sent out Treasury checks to those suspected fraudsters. I
cannot understand how other government offices can be telling the IRS that their checks are
going to fraudsters, and yet the IRS continues to pump them out.
Given our current fiscal situation, it is unconscionable that the federal government can be aware
of billions of dollars of tax dollars being stolen right out from under our noses and do very little
about it.
I'm here because I want to find a solution to this problem. First, the IRS needs better controls to
keep these fraudulent returns from ever going out the door. Second, when identity-related tax
fraud does occur, these criminals must be prosecuted, and local law enforcement ought to be
involved in that process.
Maybe the IRS doesn't want to increase anti-fraud safeguards because it might slowdown the
return process. But I think honest taxpayers would rather get their returns a few days later, and
keep money out of the hands of criminals, than get their tax return a day or two faster.
In closing, thank you again, Chairman Platts, for the opportunity to testify this morning. I look
forward to working with both federal and local officials as well as my colleagues here in
Congress, including the Subcommittee, to bring an end to this needless waste of taxpayer dollars.

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