CAGW: GAO Report Finds Stolen Identity Refund Fraud Continues to Pose Major Financial Risks for Taxpayers

Citizens Against Government Waste (CAGW) reacted to today’s public release of an August 20, 2014 Government Accountability Office (GAO) report addressing stolen identity refund fraud (SIRF). According to GAO, the Internal Revenue Service (IRS) paid an estimated $5.2 billion in fraudulent identity theft refunds in 2013 and prevented $24.2 billion in fraudulent refunds based on the cases the IRS was able to detect. The full extent of the problem remains unknown since the IRS cannot track all identify theft cases. CAGW has followed the SIRF phenomenon for several years.

Currently, most tax refunds are issued before the IRS receives copies of W-2s. That system is a good deal for taxpayers, who get their refunds quickly, but it is also a prime opportunity for identify thieves, who can file a return with a Social Security number and no worries about whether or not there is a legitimate W-2. The GAO report recommended that the IRS “fully assess the cost and benefits of accelerating W-2 deadlines” in order to conduct pre-refund matching and identify discrepancies. The GAO also urged the IRS to provide information to Congress that illustrates potential impact that fraudulent identity theft has on taxpayers, the IRS, the Social Security Administration, and third parties.

“The GAO report proves that stolen identity refund fraud continues to be a serious financial liability for both taxpayers and the IRS,” said CAGW President Tom Schatz. “As identity theft scam artists continue to get away with billions at the expense of hard-working, legitimate taxpayers, it is crucial that the IRS and Congress work together and devise a comprehensive solution.”

On November 12, 2013, CAGW hosted a briefing for Capitol Hill staff and industry leaders that included SIRF experts Christopher Lee, Senior Attorney, National Taxpayer Advocate; Steven Toporoff, Division of Privacy and Identity Protection, Federal Trade Commission Bureau of Consumer Protection; and Police Detective Paul Williams of Davie, Florida, who was a victim of SIRF. A September 21, 2014 segment on CBS’s “60 Minutes,” titled “The Tax Refund Scam,” highlighted SIRF as “the biggest tax scam around.”

CAGW is the nation’s largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.