House Ways and Means Oversight Subcommittee Chairman Charles Boustany, Jr., MD (R-LA) and Social Security Subcommittee Chairman Sam Johnson (R-TX) today announced that the Subcommittees on Oversight and Social Security will hold a hearing on tax fraud involving identity theft. The hearing will take place on Tuesday, May 8, 2012, in 1100 Longworth House Office Building, beginning at 10:00 A.M.

In view of the limited time available to hear from witnesses, oral testimony at this hearing will be from invited witnesses only. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. A list of invited witnesses will follow.

BACKGROUND:

The Treasury Inspector General for Tax Administration (TIGTA) recently reported that criminals are stealing identities at an alarming rate to receive fraudulent tax refunds.  For Processing Year 2011, the Internal Revenue Service (IRS) reported detecting approximately 940,000 tax returns potentially filed by identity thieves and prevented issuing $6.5 billion in fraudulent tax refunds.  Yet, TIGTA found that fraudulent refunds acquired through identity theft are significantly greater than the amounts detected.  Recent media reports indicate criminals are engaging in previously unheard of levels of identity-theft related tax fraud, including a Tampa, Florida ring that allegedly swindled taxpayers out of $130 million by using off-the-shelf tax preparation software and prepaid debit cards to fraudulently obtain tax refunds.

One source of information for identity thieves is the Social Security Administration’s (SSA) compilation of death records, which it uses to administer benefits.  Since 1980, the SSA has made available for purchase by the public a file containing the Social Security numbers (SSNs), names, dates of birth and death, and zip code of those who have died.  According to the Inspector General of SSA, this data file, known as the Death Master File (DMF), contains the personal information of 85 million Social Security number holders who have died since 1936, as well as the information from about 1.3 million new deaths that are added each year.
 

The DMF is useful to many organizations for fraud prevention and benefit administration.  It has been purchased by other government agencies, financial institutions, life insurance companies, credit reporting organizations, data aggregators, medical researchers, genealogists and others; and purchasers are free to re-disclose the data they obtain.  At the same time, criminals are able to exploit the availability of death information to submit fraudulent tax returns that include the decedent’s SSN, including the SSNs of deceased dependent children.  Only after the parents of the dead child have had their legitimate return rejected by the IRS do they and the agency discover the theft.
 

According to the 2011 Annual Report to Congress by the National Taxpayer Advocate, the federal government facilitates tax-related identity theft by publicly releasing significant personal information of deceased individuals.  The National Taxpayer Advocate has recommended legislative action to restrict access to the DMF.  The Taxpayer Advocate has also reported a 97 percent increase in taxpayer identity-theft complaints in fiscal year (FY) 2011, on top of a 23 percent increase in FY 2010.

In November 2011, SSA restricted the release of certain state records in the publicly-available file, resulting in the removal of 4.2 million death records from the DMF, and since that time has also removed zip code information from the DMF.  In addition, the Administration is developing legislation to limit the availability of death information.

In announcing the hearing, Chairman Boustany said, “Improper payments of tax refunds have cost taxpayers over $100 billion in recent years.  This hearing will explore a major source of the problem – identity thieves who steal Social Security numbers to engage in tax fraud.  We need to make sure that we have a complete accounting of the size of the problem, understand why it is getting worse, and explore what can be done to combat tax fraud so we can catch and put more identity thieves in jail.”

In announcing the hearing, Chairman Johnson said, “Worrying about a lost loved one’s stolen identity is a burden no grieving family should bear.  That’s why I, along with a number of my colleagues, introduced H.R. 3475, the ‘Keeping IDs Safe Act of 2011,’ to protect the Social Security number and other personal information of those who have died.  With the bipartisan support of my colleagues and the Administration we will take steps to stop these heartless identity thieves and protect American taxpayers.”

FOCUS OF THE HEARING:

The Subcommittees will examine how identity theft contributes to tax fraud, and whether the IRS and the SSA are doing enough to protect SSNs and prevent and detect false returns filed by identity thieves.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee website and complete the informational forms.  From the Committee homepage, https://waysandmeans.house.gov, select “Hearings.”  Select the hearing for which you would like to submit, and click on the link entitled, “Click here to provide a submission for the record.”  Once you have followed the online instructions, submit all requested information.  ATTACH your submission as a Word document, in compliance with the formatting requirements listed below, by the close of business on Tuesday, May 22, 2012.  Finally, please note that due to the change in House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to all House Office Buildings.  For questions, or if you encounter technical problems, please call (202) 225-1721 or (202) 225-3625.

FORMATTING REQUIREMENTS:

The Committee relies on electronic submissions for printing the official hearing record.  As always, submissions will be included in the record according to the discretion of the Committee.  The Committee will not alter the content of your submission, but we reserve the right to format it according to our guidelines.  Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response to a request for written comments must conform to the guidelines listed below.  Any submission or supplementary item not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee.

1. All submissions and supplementary materials must be provided in Word format and MUST NOT exceed a total of 10 pages, including attachments.  Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official hearing record.

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit material should be referenced and quoted or paraphrased.  All exhibit material not meeting these specifications will be maintained in the Committee files for review and use by the Committee.

3. All submissions must include a list of all clients, persons and/or organizations on whose behalf the witness appears.  A supplemental sheet must accompany each submission listing the name, company, address, telephone, and fax numbers of each witness.

The Committee seeks to make its facilities accessible to persons with disabilities.  If you are in need of special accommodations, please call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four business days notice is requested).  Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above.

Note: All Committee advisories and news releases are available on the World Wide Web at http://www.waysandmeans.house.gov/.