IRS chief: Hackers seek fraudulent returns in 2016

IRS chief: Hackers seek fraudulent returns in 2016
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The IRS commissioner said Tuesday that criminals who swiped personal data from IRS computer systems might have been focusing more on filing fraudulent tax returns next year. 

At a Senate hearing, John Koskinen, the IRS chief, offered new details about the 104,000 taxpayers who saw their personal information snapped up by what the agency and lawmakers believe was organized crime syndicates. 

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In all, Koskinen said, that stolen information led to about 13,000 fraudulent returns this year, totaling about $39 million. Of the other roughly 90,000 taxpayers, more than a third had already filed their returns. Roughly 23,500 returns were stopped by IRS anti-fraud measures, and about 33,000 of the taxpayers appeared to have no obligation to file with the IRS.

“We believe it is possible that some of the attempts to access tax transcripts were made with an eye toward using the information to file fraudulent tax returns next year,” Koskinen said.

The IRS announced that information for the 104,000 taxpayers had been compromised last week, through an agency program that allows people to more quickly obtain tax returns and other data from previous years.

The agency said that the criminals were able to access the taxpayer data by using more detailed personal information — such as a mortgage or car payment, not just a Social Security number or date of birth.

At Tuesday’s hearing, Koskinen defended the agency’s broader efforts to fight tax fraud, which has cost the government billions of dollars a year. But he also insisted the agency was trying to both protect taxpayer information and ensure that the tax filing season runs smoothly even as their budget was continually getting cut.

“If this application had not existed and these taxpayers had to call or write us to order a transcript, it would have stretched our limited resources even further,” Koskinen said, referring to the “Get Transcript” program that had been compromised.

But Russell George, Treasury’s inspector general for tax administration, insisted that the IRS had to strengthen its protections for taxpayer information. The inspector general also suggested that the IRS’s push to place more taxpayer information online would only make taxpayer information more vulnerable to sophisticated criminals.

If the IRS had followed the inspector general’s previous advice on protecting data, “it would have been much more difficult” for this year’s theft of information to happen, George said.

Koskinen acknowledged Tuesday that budget issues weren't the cause of this particular outbreak of fraud, but did insist that a lack of resources was hurting the agency's broader cybersecurity efforts. 

Senate Finance Chairman Orrin HatchOrrin HatchRift opens in GOP over budget strategy Overnight Finance: GOP divided over welfare cuts in budget | Lawmaker loses M on pharma stock he pitched | Yellen says another financial crisis unlikely in our lifetimes GOP chairman wants 'robust' tax reform process in the Senate MORE (R-Utah) added that the funding debate would have to wait until lawmakers got to the bottom of the most recent scheme.

“Any questions regarding funding levels for the agency should wait until we have a complete understanding about what occurred,” Hatch said, before telling Koskinen: "Your agency has failed these taxpayers."