News & Politics

Report: IRS Failed to Notify Nearly 1.1 Million Identity Theft Victims

Between 2011 and 2015, the IRS flagged nearly 1.1 million tax returns where someone appeared to have stolen a valid Social Security number (SSN), according to an inspector general report released Tuesday. The report found that the agency failed to notify or provide assistance to the victims of such employment-related identity theft. Adding insult to injury, illegal immigrants are the most likely ones to abuse those SSNs.

“Employment-related identity theft can cause significant burden to taxpayers, including the incorrect computation of taxes based on income they did not earn,” J. Russell George, the Treasury inspector general for tax administration, said in a statement. In other words, victims of identity theft would be required to pay even more in taxes than is their “fair share.”

“The Internal Revenue Service (IRS) does not currently notify taxpayers it identifies as victims of employment-related identity theft, nor has it established an effective process to ensure that it sends the required notice to the Social Security Administration (SSA) to alert the SSA of earnings not associated with a victim of employment-related identity theft,” the report declared.

Such employment-related identity theft is often perpetrated by illegal immigrants, to whom the IRS assigns an ITIN (Individual Taxpayer Identification Number). Such numbers are issued to individuals who are not eligible to obtain a valid SSN, but who are required by law to file an individual income tax return.

The IRS says its role is not to enforce immigration law but to collect taxes, therefore it issues ITINs to enable unauthorized workers to file tax returns, even if they aren’t supposed to be working in the U.S. Taxpayers who use ITINs are eligible for some tax credits, particularly for their children if they are U.S. citizens.

Congressional Republicans have complained to the IRS that it is protecting illegal immigrants from discovery by using ITINs while failing to share the information with other agencies. Now, that decision not to share the information has harmed victims of identity theft.

“All of us can agree that victims need to know that they’re victims, and need to know that an agency of the federal government, whether it’s IRS or whether it’s SSA, or both, ought to have some ability to talk to each other,” said Indiana Republican Senator Daniel Coats at a hearing in April.

Next Page: The IRS’s pathetic response.

Rather than commenting on the findings released Tuesday, the IRS referred reporters to an official response filed with the inspector general, where the agency insisted it’s making progress. Karen Schiller, commissioner for the IRS’ small business and self-employed division, said the agency will try to alert all taxpayers beginning next year.

“As we continue to battle and make progress against all strains of identity theft in the tax ecosystem, we recognized that we were missing an important partner in this effort — the taxpaying public,” Schiller said. She promised to design a system to notify the SSA if someone’s number has been stolen.

Using a 2014 pilot program, the IRS did indeed notify some 25,000 of the 1.1 million taxpayers who had their SSNs stolen.  The agency sent a notice encouraging these victims of identity theft to contact credit-monitoring agencies to head off more damage to their personal finances. But the IRS also said it’s prevented by federal law from telling taxpayers who stole their identity.

This is far from the first time a major scandal has been discovered at Obama’s IRS. Despite the Department of Justice’s insistence that the IRS did not target Tea Party groups, the evidence itself is damning, and the stain of corruption will not easily be erased from the agency. This scandal only further detracts from the agency’s already battered reputation.