Watchdog: IRS failed to notify over 1M people of identity theft

The Internal Revenue Service identified close to 1.1 million taxpayers who were victims of employment-related identity theft from 2011 through 2015, but almost none of the victims were informed, a Treasury Department watchdog found in a report made public this week.

“Employment-related identity theft can cause significant burden to taxpayers, including the incorrect computation of taxes based on income they did not earn,” said J. Russell George, the Treasury inspector general for tax administration, whose office issued the report.

{mosads}Employment-related identity theft is when someone uses another person’s Social Security number to get a job. The IRS identifies cases of employment-related ID theft when electronic tax returns are filed with an individual taxpayer identification number that doesn’t match income documents associated with the accompanying Social Security number.

The issue has gotten attention in Congress, in part because people in the country illegally tend to be the ones using other people’s Social Security numbers to get jobs. During hearings in April, IRS Commissioner John Koskinen said that the agency doesn’t go after the immigrants who do this because the agency wants them to pay the taxes they owe. Koskinen’s comments have drawn criticism from Republican lawmakers.

The inspector general report does not explicitly mention illegal immigration and does not discuss whether the IRS should be alerting immigration authorities. Instead, it focuses on the agency’s failure to notify people whose numbers were used by others.

While the IRS had a pilot program in 2014 in which it notified 25,000 taxpayers that someone else used their Social Security number to get a job, the program didn’t include a representative sample of victims, and a subsequent pilot was cancelled because of a lack of funds and other priorities, according to the report.

In April, the IRS said it would start notifying new victims of employment-related ID theft in January 2017. The agency told the inspector general that it will not initially notify victims who were identified before then but will determine if it’s necessary or feasible to do so after it starts its new notification program. The inspector general recommended that victims identified before January 2017 be informed.

The watchdog also found that the IRS doesn’t have an effective process in place to make sure that the Social Security Administration (SSA) is alerted about earnings not associated with ID-theft victims. 

“The lack of a formal process to ensure that the SSA is notified of income not associated with an innocent taxpayer is problematic because this notification is essential to ensure that victims’ Social Security benefits are not affected,” the inspector general said.

The IRS told the watchdog that it would develop a process to track notices being sent to the SSA about the income.

Bills that the Senate Finance Committee approved in April include provisions from Sen. Dan Coats (R-Ind.) requiring the IRS to notify victims of employment-related identity theft. 

“If there was any question about the need for my legislation to protect victims of employment-related identity theft, this report ends the debate,” Coats said in a statement.

Tags Dan Coats

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