IRS 'Not Providing Effective Assistance' to Identity-Theft Fraud Victims

Without the Obama administration’s increase in funding as part of its 2014 budget, Werfel said his department would be forced to make “difficult choices.”

“We would no longer be able to sustain our current level of effort on identity theft without significant weakening of the programs,” he said.

President Obama’s budget provides for an increase of $101 million to support IRS efforts to prevent identity theft-related refund fraud. The budget also includs proposals to curb a rise in identity theft through tax returns, including a $5,000 civil penalty for tax-related identity theft.

The GOP budget proposal slashes the agency’s budget by $3 billion, nearly a 25 percent cut.

The hearing shifted gears and fireworks went off when Rep. Darrell Issa (R-Calif.), chairman of the Oversight Committee, arrived.

He accused Werfel of “slow-rolling” the investigation into the IRS targeting scandal by blacking out thousands of pages unnecessarily and failing to turn over necessary documents.

“I'll tell you one thing -- as these pages, which are almost impossible to figure out, are gone through by the Ways and Means Committee, you better hope, you better really hope that we don't find something there that clearly should not have been redacted, which we expect we will,” the California Republican told Werfel.

The committee is trying to force the IRS to hand over a series of documents connected with the program in which the department subjected Tea Party and other conservative groups to additional scrutiny for their tax-exempt status applications.

Issa also called the IRS’s legal department “compromised.” He asked that presidential appointee William Wilkins, and the legal department he heads, be restricted from participating in the IRS’s clearance process for congressional committee information requests related to the targeting scandal. Wilkins was implicated in the scandal after a recent hearing disclosed his significant involvement in the tax-exempt application approval process.

Issa stood over a stack of documents more than a foot high that he said had redacted material.

"When you eliminate search terms unilaterally you are obstructing us by limiting the scope of discovery. Do you understand that, Mr. Werfel?" Issa said, complaining that the IRS had narrowed the date range for the requested documents.

Werfel responded that the accusations were “completely false” and there are “substantial facts and evidence” that demonstrate the process is moving forward.

“We're getting better and more effective at producing this discovery on a day-to-day basis. I have more than 100 employees working on the document request that Chairman Issa raised a concern about,’ he added.

Issa said he had no other choice than to send the Treasury Department a subpoena for many of the documents. Shortly after the hearing, Issa delivered on his promise and sent a subpoena to Treasury Secretary Jacob Lew.