It seems only fair. In a policy change, the IRS will enable identity theft victims to see copies of fraudulent returns filed in their names, reports Tax Analysts ($link).
Tax-related identity theft victims will soon be able to obtain IRS copies of the fraudulent tax returns used to steal their identity, thanks in part to a push by Sen. Kelly Ayotte, R-N.H.
“Once we have a procedure in place, we will issue an announcement informing tax-related identity theft victims of the process for receiving a redacted copy of the fraudulent return,” IRS Commissioner John Koskinen said in a May 28 letter that acknowledged Ayotte as the impetus for the change in the tax agency’s identity theft policy.
The redactions will deal with other taxpayers included on the stolen return. I am guessing could include pretend spouses and dependents used by the ID thief.
This is good news for taxpayers, as it may help them resolve otherwise inexplicable problems with their IRS accounts. It also promises to help shed light on how the thefts occur and, perhaps, help practitioners suggest measures to fight the fraud. It’s also long overdue. It’s not as if thieves can reasonably expect confidentiality for their crimes.
The luck of the IRisSh. The tax agency still seems to be way behind the ID thieves. This report from the Irish Times is hardly reassuring:
An address in Kilkenny topped a table of addresses used for multiple potentially fraudulent tax return applications submitted to the Internal Revenue Service in 2012, a study by the US treasury has found.
The address in Kilkenny was used for 580 returns in 2012, which led to “refunds” totalling $218,974 being issued, according to the study by the treasury inspector general for tax administration in the United States.
The IRS likes to claim that budget constraints are behind its abject failure to control the identity theft refund fraud epidemic. The inability to flag hundreds of refunds claimed from the same offshore address — which would seem like an easy enough programming problem to solve — indicates the problems are deeper than lean budgets.
An address in Kaunas, Lithuania, was used for 525 applications that prompted the payment of $156,274, while an address in Miami, Florida, came third on the list, with 417 applications leading to the payment of $221,806.
Somehow this doesn’t tell me the IRS needs to expand its responsibilities — but Congress and the President clearly feel otherwise.
Will there finally be real steps to fight the problem? Tax Analysts also reports ($link) that the IRS, in cooperation with states and software vendors, will require additional information to process e-filings:
Central to the announcement is a greatly enhanced public-private effort to combat fraud through increased information sharing.
Another upshot is that industry and government will need to process returns differently starting with the 2016 filing season, said Alabama Department of Revenue Commissioner Julie Magee. On the front end, tax return preparation software providers will need to provide multifactor authentication steps when a taxpayer logs in or returns to a site, she said.
The changes also will require vendors to increase by a few dozen data points the amount of information collected from the taxpayer or the return and sent in a standardized format to the IRS and state revenue departments, Magee said.
The story says the details will be announced sometime this month to enable vendors to prepare for next season. We will cover the announcement when it is made.
Robert D. Flach has a fresh Tuesday Buzz roundup, covering topics as diverse as extenders and “I Love Lucy.
William Perez, The Key Benefits of Health Savings Accounts. Tax deductible contributions, tax-free accumulation, and tax-free withdrawals for qualified medical expenses.
Jason Dinesen, History of Marriage in the Tax Code, Part 9: After Poe v. Seaborn. “Finally in 1948, Congress acted. For the first time, filing statuses were created and we moved closer to the tax system we know today.”
Alan Cole, Oregon to Experiment with Mileage-Based Tax (Tax Policy Blog):
Oregon will become the first state to implement a per-mile tax on driving. The tax is voluntary – an alternative to the state’s fuel tax. Drivers will get the choice of paying one or another. Should they choose the mileage-based tax, they will be charged 1.5 cents per mile, but get a credit to offset the taxes they pay on gas.
States have difficulty increasing gas taxes. Energy-efficient cars and electric (coal powered!) vehicles also are affecting gas tax revenues. The post doesn’t expain how the state will measure mileage; privacy issues promise to be a big obstacle for mileage taxes, but if this can be overcome, expect more states to follow Oregon.
TaxProf, The IRS Scandal, Day 754
Martin Sullivan, How Grover Norquist’s Pledge Can Hurt the Conservative Cause (Tax Analysts Blog). “First, the pledge’s hard and fast prohibition on tax hikes can prevent signers from agreeing to compromises that would result in outcomes most conservatives would consider highly favorable.”
Scott Sumner asks Why are interest expenses tax deductible? (Econlog).
The cost of equity (dividends, etc.) is not tax deductible, while interest is deductible. But why?
Good question. I respond with another — why aren’t dividends deductible? That would prevent double taxation of corporate income while making sure corporations can’t be used as incorporated investment portfolios.