Senate panel approves identity-theft, taxpayer protection bills

Senate panel approves identity-theft, taxpayer protection bills
© Greg Nash

The Senate Finance Committee on Wednesday approved two bipartisan bills aimed at protecting taxpayers and preventing identity theft and tax refund fraud.

The bills passed by voice vote.

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One of the bills includes more than a dozen provisions aimed at curbing identity theft and tax refund fraud, which have been top tax concerns in recent years.

The provisions include increasing the penalties for certain crimes and renewing the Internal Revenue Service’s (IRS) “streamlined critical pay authority,” which allows the agency to quickly recruit and retain top information technology personnel.

“The bill aims to put more tools in the proverbial toolbox, and, going forward, the committee will remain vigilant as we seek to identify additional measures that will allow us to detect and prevent stolen identity refund fraud,” Senate Finance Committee Chairman Orrin HatchOrrin Grant HatchLobbying world Congress, stop holding 'Dreamers' hostage Drug prices are declining amid inflation fears MORE (R-Utah) said.

An amendment championed by Democrats about the regulation of paid tax return preparers failed on a party-line vote. An amendment that relates to the issue of illegal immigrants using others’ Social Security numbers (SSNs) to get jobs was adopted.

This bill was originally set to be considered by the committee in September, but the vote was postponed after Republicans voiced concerns about a provision that would have given the Treasury Department and the IRS more power to regulate paid return preparers. They had issues with the provisions because they opposed giving the IRS more authority following the political-targeting scandal.

Senate Finance Committee Ranking Member Ron WydenRonald (Ron) Lee WydenCongress needs to step up on crypto, or Biden might crush it Democrats face growing storm over IRS reporting provision Best shot at narrowing racial homeownership gap at risk, progressives say MORE (D-Ore.) and other committee Democrats offered an amendment that aimed to address Republicans’ concerns by granting only Treasury the authority to develop minimum standards for paid preparers, taking the IRS out of the equation.

“We can’t fully protect taxpayers without cracking down on unscrupulous return preparers,” Wyden said.

He said that the issue of regulating paid preparers has had a bipartisan history and should not be a political issue. He called the topic a “red, white and blue consumer-protection issue.”

Sen. Robert MenendezRobert (Bob) MenendezDemocrats weigh changes to drug pricing measure to win over moderates Advocates frustrated by shrinking legal migration under Biden Rand Paul blocks quick vote on House-passed B Iron Dome funding MORE (D-N.J.) said that omission of a provision on paid preparers “ensures this bill is an inadequate and incomplete response to ID theft at best.”

Hatch said he supports minimum standards for preparers but would vote against the amendment because Republicans indicated the bill would be unlikely to pass the full Senate if the amendment were included.

Sen. Dan CoatsDaniel (Dan) Ray CoatsOvernight Hillicon Valley — Scrutiny over Instagram's impact on teens Former national security officials warn antitrust bills could help China in tech race Cyber preparedness could save America's 'unsinkable aircraft carrier' MORE (R-Ind.) said that voting against the amendment “doesn’t take this issue off the table.”

Coats also offered his own amendment, which was added to the bill, that requires the IRS to notify victims of employment-related identity theft. Determinations of such identity theft would include the IRS finding that an SSN on a W-2 does not match the name of the tax return filer. 

Coats brought up the issue of employment-related identity theft in a Finance Committee hearing last week. These cases can involve illegal immigrants using others’ SSNs to get jobs and then filing their taxes using their IRS-issued individual taxpayer identification number.

IRS Commissioner John Koskinen has said the agency doesn’t go after illegal immigrants who use others’ SSNs just to get jobs. He said it’s in everyone’s best interest for undocumented workers to pay the taxes they owe.

“It’s unfathomable to me that the IRS would turn a blind eye to this problem when legitimate taxpayers are stuck with the consequences of someone using their Social Security number to gain employment,” Hatch said. “This amendment provides common-sense notifications to victims and requires the IRS and the Social Security administration to do more to address this problem.”

Menendez earlier in the hearing did not explicitly mention Coats's amendment but expressed concerns about hurting undocumented workers.

“We need to differentiate between these professional criminals and immigrants that are just trying to get a job and support their families and are doing no harm,” he said.

The Senate Finance Committee also approved a second bill on Wednesday that contained provisions on taxpayer protection, including some that would extend the time taxpayers have to bring a civil action for a wrongful levy and require tax-exempt organizations to file forms electronically.

— Updated at 5:47 p.m. on April 20.