Statement of Judiciary Committee Chairman Lamar Smith Full Committee Markup of HR 4362, the Stopping Tax Offenders and Prosecuting Identity Theft Act (STOP Identity Theft)

Statement of Judiciary Committee Chairman Lamar Smith
Full Committee Markup of HR 4362, the
Stopping Tax Offenders and Prosecuting Identity Theft Act (STOP Identity Theft)

Chairman Smith: Tax fraud through identity theft is a rapidly growing problem in the United States.  With stolen identity information — Social Security numbers and their corresponding names and birth dates — criminals have electronically filed thousands of false tax returns and have received hundreds of millions of dollars in wrongful refunds. 

The criminals deceive the Internal Revenue Service (IRS) and file a return before the legitimate taxpayer files.  The criminals then receive the refund, sometimes by check but often though a convenient but hard-to-trace prepaid debit card.

The criminals then wait for the mail to deliver the cards and checks at abandoned addresses.  According to media reports, postal workers have been harassed, robbed and, in one case, murdered as they have made their rounds with mail trucks full of debit cards and master keys to mailboxes.

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 living as a dependent on their own forms. 

Often, the fraud is not detected until an individual files a tax return that is rejected by the IRS because someone else has already falsely filed and claimed their return.

J. Russell George, the Treasury inspector general for tax administration, testified before Congress that the IRS detected 940,000 fake returns for 2010 in which identity thieves would have received $6.5 billion in refunds.  And those are just the ones they caught early. 

The IRS estimated that they missed an additional 1.5 million returns with possibly fraudulent refunds worth more than $5.2 billion.  The number of these cases has increased by approximately 300 percent every year since 2008.

Tax fraud is a very real problem, and Congress should do all it can to protect all citizens from this costly crime.  I am proud to be an original cosponsor of H.R. 4362, the “STOP Identity Theft Act of 2012,” 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. 

H.R. 4362 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 billions of dollars each year.  It is critical that we take further steps to reduce the number of people who are victimized by this crime.

I urge my colleagues to join me in support of H.R. 4362.