Stopping Tax Offenders and Prosecuting Identity Theft Act of 2012

Floor Speech

By:  Debbie Wasserman Schultz
Date: July 31, 2012
Location: Washington, DC


Ms. WASSERMAN SCHULTZ. Mr. Speaker, I rise today to urge my colleagues to support H.R. 4362, the Stopping Tax Offenders and Prosecuting Identity Theft Act of 2012, or simply the STOP Identity Theft Act.

Many of you have seen the recent headlines calling attention to the escalating nationwide epidemic of tax return identity theft. An unsuspecting taxpayer goes to file their tax return only to be told by the Internal Revenue Service that someone else has already filed and claimed their hard-earned tax refund.

This happened to one of my constituents, Joan Rubenstein, who was a 64-year-old teacher. When her accountant filed her 2010 tax return in April of last year, he was told by the IRS that she had already filed. Joan followed advice and filed a police report and reached out to the IRS. But after 10 months, she still had not received her refund. Only after working with my district office were we able secure her refund, which she desperately needed to assist her daughter with her student loan payments.

For her 2011 tax return, Joan was informed by the IRS taxpayer advocates office that she was okay to proceed with filing her return this year. Yet, shockingly, Joan's accountant filed only to learn that she was once again a victim of tax return identity theft for a second year in a row.

No one should have to go through the trauma of having their hard-earned tax refund stolen, and certainly not 2 years in a row. And Joan is not alone. This case, unfortunately, is not an anomaly. My office has been inundated with constituents who have also had their tax refunds stolen, and I know this is a rampant problem in Chairman Smith's district, and his home State of Texas as
well. The amount of theft that goes on with this type of case is really astronomical.

It's stories like Joan's that prompted me to file this legislation that is before us on the floor today. The crime of tax return identity theft has quickly emerged over the last few years, and Congress must act to quickly address this epidemic. Tax return identity theft wreaks emotional and financial havoc on hardworking taxpayers like Joan and costs the Federal Government billions of dollars.

In 2011 alone, Mr. Speaker, the IRS reported that--listen to these numbers--851,602 tax returns and $5.8 billion were associated with fraudulent tax returns involving identity theft. That's a 280 percent increase since just 2010.

These tax return identity thieves hide behind a veil of technology by stealing Social Security numbers and filing false electronic returns where the payoffs are almost instantaneous. Right now, more thieves and criminal organizations are turning to this lucrative, low-risk, high-reward crime because law enforcement lacks the kind of stiff criminal penalties afforded many other forms of identity theft. Essentially, because of the small likelihood of getting caught, and the very minimal current penalty, it makes sense for these thieves to roll the dice because the chances of getting caught and actually doing any time at all is very low.

In this instance, technology has simply outstripped the enforcement tools that are currently on the books. Basically, this crime is worth it for the criminals who are committing it, and we need to make sure that it is not worth it any more so they don't have incentive to continue and they move on to the next thing, and then we can go after them for that.

We must protect the thousands of taxpayers like Joan who fall victim to this crime, many of whom belong to vulnerable groups like seniors, veterans, and even minors. The STOP Identity Theft Act brings together several measures to strengthen criminal penalties and increase the prosecution rate of tax return identity thieves.

H.R. 4362 will add tax return fraud to the list of predicate offenses for aggravated identity theft. The aggravated identity theft statute was created in 2004 to fight identity theft crimes committed to facilitate other types of felonies. However, at the time, the problem of tax return identity theft was very new, and it wasn't included as part of the predicate offenses under aggravated identity theft.

Today, it has become an urgent nationwide problem, and we must give law enforcement the additional tools needed to combat this crime. Each of the last two administrations have called for adding tax fraud to the predicate offenses under aggravated identity theft. With this change, the STOP Identity Theft Act will toughen sentencing for tax return identity thieves, which will help deter this kind of crime.

Importantly, the legislation also expands the definition of an identity theft victim to include businesses and charitable organizations. Often these organizations have their identities stolen and used in phishing schemes to extract the sensitive information from unsuspecting taxpayers used in tax return thefts. Essentially what happens, and we've all been warned about this, you get an email from what you think is your bank or the charitable organization that you are used to giving donations to, but it's really not because these thieves have stolen that organization's identity, and they are asking for your personal information, and unsuspecting victims give them that information.

By the way, you should never do that because your bank and charitable organization won't ask you for personal information.

These thieves then use the harvested information to file thousands of fraudulent tax returns. In fact, on the IRS Web site, it is noted that this type of phishing scheme is the most common one seen by the IRS. This amendment to the identity theft statutes will ensure that thieves who misappropriate the identities of any business, be it a small business or a nonprofit organization, can be prosecuted.

The STOP Identity Theft Act also calls for better coordination between the Department of Justice and State and local law enforcement to make the most efficient use of the law and resources. My own local law enforcement agencies in south Florida have been flooded with crime reports of tax return identity theft, and they need all the help they can get.

Finally, the legislation also calls for the Department of Justice to report back on trends, progress on prosecuting tax return identity theft, and recommendations for additional legal tools to combat it. Information and data about trends on tax return identity theft can be valuable tools to detect and prevent future fraud, and it will inform Congress of additional legislative actions that will help in the effort.

This legislation is just the strong beginning of the congressional effort to combat tax return identity theft. I know this issue is deeply concerning to many of my colleagues, and I look forward to working with them in their efforts.

This legislation is intended to provide targeted tools for law enforcement right away so that it is better prepared before next tax season rolls around and we have more victims who are really going to have months and months of problems and billions of dollars lost.

I want to thank Chairman Smith for your support and your leadership on this issue. It really is a pleasure to work with you. And as to the various organizations that have supported and helped craft this legislation, in particular I would like to recognize the National Conference of CPA Practitioners and the American Coalition for Taxpayers Rights for their support and efforts with this bill.

We must ensure that Federal laws are keeping pace with emerging crimes such as tax return identity theft. It is time to make prosecution of tax return identity theft a greater priority. The STOP Identity Theft Act is an important step toward this goal, and I urge my colleagues to support this legislation.

Once again, I thank Chairman Smith for working with me on this legislation.


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