Victims Of Fraudulent Tax Filings Facing An Uphill Battle

Identity theft in the US has become a very real problem for millions of people, especially when thieves use victims’ names and Social Security numbers to file fraudulent tax returns. To give the scope of this problem some perspective, the Treasury Department’s Inspector General For Tax Administration released a report showing that in the 2013 tax year, 2.4 million taxpayers’ names and Social Security numbers were stolen and used on bogus tax filings. That’s a 1,000% increase compared with numbers from the 2010 tax year filings. The Treasury paid out $5.8 billion in fraudulent refunds in 2013 and caught over $23 billion in claimed refunds before they were paid. Bloomberg Business recently wrote an article that highlighted this growing trend.

If your name is used on a tax return, you’ll likely have lots of questions about the fake filing. Many taxpayers are concerned if their children or spouse’s information was also compromised, and gaining access to a copy of the fraudulent return can help answer many of those questions. But for those who’ve been a victim of identity theft, getting that information has proven challenging.  

Thanks to Section 6103 in the US tax code, IRS agents who release taxpayer information to someone they’re not authorized to disclose it to can face up to 5 years in prison and a $250,000 fine. This relic in the tax code dates back to the 1970’s and was added after President Nixon used IRS audits of opponents as a political tool. Understandably the penalties contained in this section of the tax code make IRS agents extremely cautious about releasing any information, even to those most affected by the fraud. The IRS explains that fraudulent returns may contain the data of others, making it impossible to release them to the victim.

The IRS continues to work through creating a policy on what information it can release to victims and how. According to National Taxpayer Advocate Nina Olson, “We are currently assessing how much information we believe the IRS can provide” and the organization may make a recommendation later this year. Meanwhile, those who have had returns fraudulently filed continue to be in the dark about what exactly was stolen and how.