Statement of Judiciary Committee Chairman Lamar Smith Crime Subcommittee Hearing on: Identity Theft and Income Tax Preparation Fraud

Statement of Judiciary Committee Chairman Lamar Smith
Crime Subcommittee Hearing on: Identity Theft and Income Tax Preparation Fraud

Chairman Smith: In 2010, a couple from Fort Worth, Texas, lost their daughter a week after she was born.  That year, when they filed their tax returns, they found that someone had profited from the death of their newborn baby by fraudulently claiming their deceased daughter as a dependent. 

The following year, the same thing happened to some friends of the couple who also had lost a young child.  In addition to dealing with their grief, these two families were forced to fight through the federal tax system to set the record straight. 

Unfortunately, the fraud committed against these two Texas families is not an isolated event.  Tax fraud through identity theft is a rapidly growing problem in the United States. 

The number of these thefts has increased by approximately 300 percent every year since 2008. The Internal Revenue Service (IRS) detected almost one million fake returns among the 2010 returns alone.
Tax thieves victimize innocent taxpayers in a number of ways. They often file fake returns under a false name or claim someone who is no longer alive as a dependent on their own forms. 

Often, the fraud is not detected until an individual files a legitimate tax return that is rejected by the IRS because a false return has already been filed and the refund paid.

Tax return identity theft is a very real problem. Congress should do all it can to protect citizens from this crime. 

I am an original cosponsor of H.R. 4362, the “STOP Identity Theft Act of 2012,” along with Congresswoman Debbie Wasserman Schultz.  This is a bipartisan bill that strengthens criminal penalties for tax return identity thieves. 

H.R. 4362 adds tax return fraud to the list of predicate offenses for aggravated identity theft and expands the definition of an “identity theft victim” to include businesses and charitable organizations. 

It also improves coordination between the Justice Department and state and local law enforcement in order to better protect groups that are most vulnerable to tax fraud so they are not future victims. 

The changes to federal law proposed by H.R. 4362 are important to keep pace with this ever-increasing crime.

Tax identity theft costs American families and taxpayers millions of dollars each year.  We can help reduce the number of people who are victimized by this crime.