That is long overdue as far as im concerned and well get into it. I have to apologize. Senator widen is not here yesterday. But hes coming. In this town especially right here on this committee, we often talk in terms of hundreds of millions, billions or even trillions of dollars. Some joke about a number called budget dust even if that number has nine or 10 zeros behind it. But let me tell you about a number that is truly stunning, 15,800 dollars. Thats saved through hard work, sacrifice and honest living. Thats 800 saved for the down payment for a new house for a growing family. And that 15,800 in savings is wiped away by criminals who use fire confusion and intimidation as their weapons. This is a story of the degan family from utah. And i would like to play a news clip from kcbx to tell us their story. Can we do that . These crooks have gotten a lot more sophisticated and a lot more aggressive. But he learned that the hard way one week ago. Brendan and Melissa Degan are excited for christmas but they only have a few presents under their tree. On friday, melissa got a phone call telling her she ohed back taxes and was about to be arrested. I was like what can i do to fix it. Theres no way i can be arrested. I dont have anyone to watch my kids. At the same time another scammer was calling her phone with the bonus i. D. 911. Melissa went to the bank and withdrew 15,800 which he used to pay green back cards. That money was gone by the time she realized she had been victimized. I havent been able to stop crying. I cant eat. My life has totally changed. Im just sick to my stomach. Embarrassed, you know, just a loss that all this money were trying to save for a down payment on a home to have a bigger home to take care of our kids. My heart has been totally ripped out because of this. The story is all too familiar to the lot of the unified Police Department which is investigating dozens of these cases. These suspects are getting more and more forceful. Theyre demanding that people pay. Theyre demanding that they get these prepaid debit cards. Theyre sending the police to come and arrest them. For the record neither the i. R. S. Or the police collect payments over the phone. Melissa wishes she knew that a week ago and has a message to the people who did this. I forgive you. But it is sick and its wrong and i i dont know how they could live with themselves. I dont know how they can make phone calls and hurt people. Not any time of the year but especially christmas. Now her cousin has started a go fund me page. Friends, relatives and total strangers are giving whatever they can to melissa and brendans fund to help this family recover. We have put a link to melissa and brandons page. At last check it has raised 4,000. In studio rick aaron, good for utah. Thats just one family out of millions that have been targeted and thousands that have been victimized. This is just one scan. But make no mistake taxpayers across the country are facing Identity Theft in record in other words, account takeovers and other criminal attacks. Once again we have to stop this. Taxpayers have to be aware of the risk and better protected from attack. These criminals must be found to justice. I look forward from the testimony on todays panel. To learn more about how we can establish these goals. Let me turn to senator widen for his opening remarks. Senator widen thank you very much senator hatch. I appreciate the time to work on this in a bipartisan. Since the day that the i. R. S. Opened its doors scam artists have been hatching up new ways stealing taxpayer dollars from the treasury. Whats new is the ripoff artists are now stealing americans identities and personally threatening them on an industrial scale while directly robbing them of their hard earned money. The fraudsters are constantly dreaming up new tactics and then they milk them for all theyre worth before they start getting caught. Then its lather, rinse and repeat. Today the committee will focus on the latest strategys that are plaguing taxpayers. The ones that are hitting oregonians hardest is the fake phone call demanding money or personal information on behalf of the i. R. S. In fact, these calls were the number one Consumer Complaint registered with the Oregon Department of justice just last year. Not Everybody Knows that the i. R. S. Simply does not cold call individuals making demands or threats. So its pretty clear from my Vantage Point there is a lot more work to be done to defeat this. Given the sophistication of this criminal activity and the fact that a lot of it comes from overseas, this sure looks to me like an emerging type of organized crime. So the real question is, what is it going to take to root it out and get the bad actors on the sidelines. Whats the role for more prosecutions stronger deturnt more cops on the beat. And whats the best of getting the word out so that taxpayers arent tricked into surrounding their life savings to some intimidating voice on the other end of the phone line . But even if our people manage to avoid the phone calls, you can bet that the crooks find other ways to profit. Tax preparationspreparation software has become the scammers new sharp lane. They acquire a taxpayers personal data from the personal market or hack into personal data bases and then they file false returns electronically. The victims may not find out until much later and by then its just too late. Already. There have been thousands of reports like this in 2015. Were here today. Some Software Vendors arent doing enough to help prevent fraud. In my view, part of the challenge is getting the states internet tax services and the i. R. S. On the same wavelength. Theyve got to communicate and Work Together to make sure that the criminals cant just in a nimble fashion slide from one jurisdiction to the next as they rip off more unsuspecting americans. Now some taxpayers may choose to avoid software but not even a paid tax prepairer is guaranteed to the safe. In fact, many of them dont meet any standards for confidence. There are for too many predators willing and able to prey to those who come through their door. They secretly false fy their victims returns to boost the refund and then they pocket the difference. Once the tax season ends the crooks disappear from the store front thace occupy and theres no trace on where theyve gone. A few states like mine are rules in place to help shield the taxpayer from this kind of ripoff. Most states do not. So senator harden and i have introduced an act to give all americans the security they deserve. Our colleague senator nelson is also a leader on this issue of keeping taxpayers safe from Identity Theft and fraud. And all of us wish as i indicated to chairman hatch to work on this in a bipartisan way. The bottom line is, theres no end to the ingenuity of the con artist. So my hope this morning is well get some pressure ideas for catching up to this wave of fraud and stopping i. Obviously, it cannot come soon enough. Weve got a distinguished panel here today. Especially pleased that mr. Ellen clem director of education in the oregons attorney General Office is here. I thank all our witnesses. We look forward to working with you in a bipartisan way. Our first witness today is acting assistant attorney general general caroline cirolo. Ms. Cirolo was pointed Deputy Assistant planning and policy of the tax division in january of this year. Prior to that she was chair of the tax and Litigation Group at rosenberg and Martin Greenberg in baltimore. Ms. Cirolo we welcome you to the committee. We look forward to hearing from you. Caroline the department greatly appreciates the commitment that the committee has brought to this very important issue. Combating the theft of personal information to file fraudulent claims is a top priority for both the tax division and u. S. Attorney offices across the country. Your your efforts to bring attention to this insidious crime will help detect and report Identity Theft and fraud. Todays hearing also sends a strong message that the government is determined to identify and prosecute the individuals behind these schemes and in doing so will bring all its resources to bear. The departments tax division has one purr, to enforce the nations tax laws, fully fairly and consistently through civil litigation and criminal prosecutions. Our close working relationships with i. R. S. Criminal investigation, tigda, the f. B. I. , the u. S. Attorneys offices and other state and local partners continue to enhance the governments ability to respond quickly, efficiently and forcefully to often changing patterns of criminal conduct. Refund fraud or surf is an example of this type of challenge. In surf crimes offenders steal Social Security numbers. They file tax returns early showing a false refund claim and then load it on prepaid debit cards or access a check. Surf crimes involve multiple offenders at several levels. And frequently involve employees that have large vo volume of information. They hit like melissa and brandon. These include but are not limited to the elderly, the hospitalized, students and members of our military deployed overseas. While the i. R. S. Will make good on any refund to the taxpayer there are inevitable burdens and delays while the matter is delayed. More over were all victimized at a loss from the u. S. Treasury. Surf crimes need be reported early. To this end the tax division expedites the procedure in surf cases. Among other things the authority to initiate grand jury investigation, and to charge those involved in surf crimes by complaint without prior authorization from the tax division. The collaborative efforts of the tax division has strengthen the response to this crime. Through december 31st, 2014 the department prosecuted more than 1400 individuals. And courts are imposing substantial sentences. To further leverage the information gained from each investigation in february 2014, the assistant attorney general of the tax division created a surf Advisory Board consistenting of experienced surf prosecutors. The board works to develop and implement a National Strategy to insure effective nationwide enforcement and prosecution of surf crimes. For example, the board conducts training sessions for fraud analysts at the scream development centers. The board provides resources to prosecutors across the country. It works with u. S. Attorneys offices to develop local task forces. These initiatives enable prosecutors and Law Enforcement agents to identify schemes and to prepursue the most culpable offenders while providing the i. R. S. With real information that can be used to improve it filters and stop fraudulent refunds. The prosecution of surf crimes is a until priority. Together we will continue to look for the most effective way to punish the offenders and bring this conduct to an end. Thank you for an opportunity to provide the departments perspective on this issue. I look forward to answering any questions you may have. Thank you so much. Our next witness is timothy camis. Inspector general for Tax Administration or tigda. He has served at the Internal Revenue service for over 23 years. He has a long career of having successfully investigated cases of bribery and fraud affecting the u. S. We look forward to taking your testimony at this time. Thank you. Chairman hatch, widen and member of the committee. Thank you for the opportunity to testify on the topic of tax schemes and scrams during the 2015 public season. By raising awareness, we may prevent the next person from becoming a victim which is a very good thing. Each year the i. R. S. Compiles what it sees as the dirty does. Many of them peaked as people prepared their returns or utilize the services of paid prepares. My outline today outlines schemes as they have proven to be effective ways to steal money in many cases before the victim realizes they have been scammed. The first scam is the phone impersonation scam which landed on the top of the dirty dozen this year. It is the largest and most pervasive scam that were aware of. And it has claimed thousands of victims in every state represented in this committee. Heres how it works. The intended victim receives an unsolicited phone call from a person claiming to be an arrest agent. They tell the victim a madeup badge number and that they are currently liable for some amount owed. The callers may know the last four digits of the victims Social Security number. They then threaten the victim by stating that they failed to pay immediately. The slim be arrested or face other criminal sanctions such as losing their driver else license. I myself received one of these calls at my home on a saturday. Tigda has received over 366,000 reports. As of march 9th, 2015, over 3,000 individuals have been victimized by this scam by paying a total of 15. 5 million. The highest reported loss by one individual was a staggering 500,000. And then one particularly sat story a member of the committee forward us a letter from a constituent whos close relative suffered a tragic death after receiving a tragic phone deprall these scammers. We are reaching out via the media in conjunction with the i. R. S. And the federal trade commission as well as providing testimony to this committee in hopes to eliminate this type of abuse and prevent other vulnerable individuals from becoming victimized. Another ongoing scam id like to highlight involves using the story that the victim has won the lottery. This is a continuation of an old scam. It starts with an email or a telephone call out of the blue declaring that the victim has won the lottery. But in order to collect the winnings they must first pay the tax to the i. R. S. The lottery scam often but not always originates from outside of the United States. In the end the victims pay the money but they never receive any lottery winnings. Just a series of these scams is the risk of taxpayer Identity Theft. The i. R. S. Has made improvements in its identification of Identity Theft returns before they are released but continued attention is needed to effectively combat this crime. For example, the i. R. S. Still does not have timely access to third party income and with holding information. Most of this Third Party Information is not received by the arrest i. R. S. I. R. S. And well after the taxpayers begin filing their returns. The deadline for most returns is march 26. This gaffe in time prevents the i. R. S. From conducting validity checks. Legislation would be needed to access rate the filings. The i. R. S. Has taken steps to prevent the filing of Identity Theft tax returns by locking the tax accounts of deceased individuals to prevent others from vialing a return using the departs or Social Security. The i. R. S. Rejected over 338 ,000 e file returns and stopped nearly 16,000 paper file return through the use of these locks. Just 11 days after the Filing Season began, the i. R. S. Reported that it had prevented the issuance of more than 2 million in fraudulent refund as a result of these filters. Our scheme such as prisoner fraud, unscrupulous tax preparers are discussed. We are addressing these criminal activities. We hope this work will eliminate their work on taxpayers. Chairman hatch, Ranking Member wide b. Thank you for the opportunity to share my views. I look forward to questions. Chairman thank you so much. Im going to introduce our next witness. Thank you very much. And i thank you for inviting mike ally to testify today. Thanks to the leadership of our governor mike pence and the commissioner the department of revenue to stop the plan that helped 88 million in attempted debt. This the cost to that as mr. Ali will explain cost the state 8 million. Compared with some of the thanges we do around here which is usually the opposite. We spent eight and got 88 back and saved a lot of taxpayers from this fraud and certainly in bringing the needed savings to our state. Mr. Alley commissioner ally brings a well to private sector experiences to his job. Hes worked for decades in lim positions in the banking industry. Hes the c. P. A. Hes started businesses. So he understands firsthand how Important Customer Service roll for the department of revenue. Again, mr. Choirm, i thank you for inviting mike this morning and look forward to his testimony. Thank you, senator. Chairman and Committee Members thank you for inviting me to discuss this important topic with you today. On behalf of the citizens of indiana is an honor to share our story. The nature of the problem and the overall steps. The steps that indiana have taken. And then recommendations affect this epidemic problem. Tax refund fraud is one of the most lucrative platforms for criminals to mon ties the value of stolen identity. And the advent in fro sayses has only enhanced the ability of the criminals to utilize the committee in filing returns at nominal costs. 12 of the total refund dollars that were requested from indiana were found to be fraudulent. It represented 78,000 frauds on the returns that we stop that contain manufactured or stolen i. D. S. And again we saved the state 88 million until the process. Were seeing a dramatic increase in the use of valid i. D. s which had been stolen. We believe the availability of a valid store of i. D. S have never been greater. We must do the same. Sending let me share with you what we have here in indiana. We realize that we were suffering substantial losses from refund fraud. We work with governor pence to identify a program that we can begin building. Our staff reached out to fellow states through the central of tax administrators. And our partner there to see if there are some ideas and implement them. The response was very supported that we noted partial solutions an fragmented efforts across the group. We flishyated a pilot program. This program used less neck. Just scream. Identity theft with information or we wont identify her information. We withheld those and i let confirmation to have them confirm their identities. And stop those refunds. You know the idea confirmation quiz is only a part of a larger process. It became very near the the department that the Department Needs to make some systemic changes by making significant investment in staff technology. For the 15 Filing Season weapon continue to make enhancements. Weve implemented a new filter. That will allow us to better identify those valid i. D. S. We have to define greater expectations from our certified Software Vendors as to the information they said our way. Were still battling there program but a few key lessons have been learned. First, it might be a strategic authority. Weve got to address it. Requires a physical investment, staff, technology and third party resources. Second collaboration. No one has all the answers and we cant solve this problems by ourselves. Showing data. Yeah. And Software Vendors will be important. Actually its an ability to communicate on a timely basis is critical. Weve got to develop some targed solutions. They will continue to chair thange approaches and weve got to stay ahead. It is a preferred tools of fraudsters. We found that 50 are fraudulent. In terms of some recommendations. We neat the state, the i. R. S. And Software Vendors have unique tools. Each has the i. R. S. Is in that great position to management sophisticated fraud. And finally Software Vendors have great information. And it can be helpful during their intelligence. I just want to summerize. This problem is here to stay and weve got address it. Secondly. Collaboration and sharing of information among the i. O. S. Appear our golder will chair anonymous information is critical. Third weve got to make our investments. And im confident her body has continues to is only way that we can get out an beat it. Thank you for allows us to share your story. I look forward to trying to answer any questions you may have but thank you for one mr. President. Mr. Speaker well thank you. We appreciate you making an earth to be here. Im very pleased, john valentine. Chairman vo valentine was a member of the u. S. State senat where he served with distinction from 1988 until his confirmation as Tax Commission chair in september 2014. Prior to that he was in the utah house of representatives but was also an attorney. Were really grateful that you can take some time and be with us today. And joining me here this morning. So we appreciate it frpbl thank you very much chairman hatch. Members of the committee. Im here to discuss ways to reduce the tax frauds that were seeing develop in this country . There are four issues that you ought to consider. Number one strength and information wean the states. And as it relates to prepaid debit cards. Apply refunds to payment of fee first filing services. And four, required Third Party Services to tighten front and security by using melity factor and other unexposure. Briret to the commitment of the fighting season. They installed a state of the art communer Software System to identify fraudulent returns. On january, deployed the system. As we began to process returns our system tried to send us air notices. It said that we were fraudulence in returns. With the taxpayers. Within so days we began receiving text calls saying. When this show thought that these i slid into the weck. It was clear that they were not. We found several factors that were common in all of these calls. One, the returns have the direct deposit information. Changed from the Previous Year bank kd. The returns contain routing an account number to differ between the federal return and the state return. Three, most of the returns afear have the exact 2013 return data populated and the 2014 return. The next issue we found that is common with the address on the returns by the same on the address in 2013 everyone when there was errors in the address. And finally, since multiple punishments were made through one vendor it appears that something in their process was compromised. You have to notify other states of what we were finding. We talked with the Internal Revenue service. We think there might be a clizz of the modernize electron finance system. The accounts in question that we were able to identify were immediately sent to the centers. 31 returns were confirmed suspicious. We asked them to confirm on their sight. Were still waiting to hear. Thats a tax. Hit short. We hurried. We stopped all our refunds. During that first week we found five different fraud schemes four of which we have seen before. One was the knew one. And the new one was something had actually tax returns. Not just Identity Theft but tax returns from fraud lent refunes. We found great div determining the nation chur of the Financial Institution and they count information. Specifically we found that there was no uniformity numbering to decipher Traditional Bank accountings. Were funding to a legitimate bank account. Can you fix this . Sure. To have identifyier numbers in the you routting numbers or the cot number that id fice as a pregead den tiss. We dont do it. To perpetrate fraud without having anything at all the risk. Heres how it works. The fraudsters allowed to get paid. And the state of utah is out of money. Findly we Found Services often lack of front. Both of the i. R. S. And for the state Tax Commissions. Thank you mr. Chairman. Thank you. Looks like you when we appreciate your testimony. Finally i walk in ellen clem from the office of the Oregon Attorney general. That the attorney general and works to pro text organize gonians including the type of scams that were talking about today. We have tores and we look forward to taking your testimony. Thank you, chairman hatch and senator wide b. Its an honor to be here today and chair my expertise and experience with you. Every day i hear stories from oregon begans about a wide variety of frauds and scams. Lately these stories have focused completely on the arrest impossibler scap. In 2014, this scam topped yorks list of Consumer Complaints. Last year we seffed more than 13,000. And whats worst. Did you see you recorded losses to them. And we know from testimony presented here today that that number is just the tip of the iceburg. The first story is that of a woman ill refer to as diane. In august of 2014, she lost 15,000 to an arrest imposter scam. This is the largest individual loss reported to the Oregon Department of justice in 2014. Like many other victims she received a message on her answering machine for a man claiming to be from the i. R. S. Directing her to call him back at a phone number with a 202 area cold. She returned the call and the person who answered read her an affidavit for her arrest. 18 months in prison and she would be arrested if she did not pay. Depyian was terrified. She pleaded. He getted. Only if you pay 15,000 by purchasing a series of money card. She was out 15,000. Individuals like diane who send money to the scammers arent the only victims. In september of 2014, i was contacted by marissa phillips. A Small Business owner whos employees have fallen sbs. After spending a small amount of money. She had been hagged and started anchesing our number phone number. They began calling marissas Small Business. For ssts and persons with disabilities. When marissa calls me a few days later, she told me the scammers had called her business at a rate of 20 or 20 minutes straight. And all of these calls prevented her to those who actually needed i. The seniors, their families, hospitals, doctors and other staff. Marissa was forced to change the business phone number. Thankfully not everyone in oregon will receive victim. And id like to think because weve been working very hard to educate oregon yanns. He has several exchange tools. Because t and i both know that well informed oregonians are much more like to recognize fraud. If theyre educated. We know these scams can be hard to track. The attorney general is in partnerships withor. Try. Advocacy groups and members of the media. Were able to share complains complaints. Our partners give us a stronger voight. And keep oregonians like diane linda, and marissa and thank you, senator widen for the opportunity to share these stories with you today. I want to thank again for testifying in the midst of Filing Season. I really applaud him. Like commissioner aly youre taking as whelm to commission or taxpayers. An on your testimony you mentioned that you would like to between the i. R. S. And the states. I would really appreciate if you would elaborate. And what information could you provide to the i. R. S. A. If you have any suggestions about how the committee commission. And we would like to have him comment onen that. Thank you mr. President. There are a couple of plays that have remembered points. Let me see this as a background. Especially the ones we deal with. The trouble is its not being shared in realtime. The information is bare and use to look at the returns as theyre coming. One of the things that the you may consider is the idea of moving up. The start widen indicated. Bring out from 31st. But we have a big gap because the end of ply years wont have to come out until march 30th. So this is the peoples money. Theyve overpaid. And yet we cant give him the refund. That gap is a big problem for us. And that one would help a lot. Another one is for the senat and the house to be able to encourage the i. R. S. To have a chairman of information. There should be able to respond pretty quickly. We identify him we can put on the taxpayers. And yet yes still cant. Those are back in realtime. Well, thank you very much. In my only statement i shot video of the deggan stamly. Your office is doing everything in its power to track them down. And stop i have that commitment. You more than have that commitment. The men and women who work at the treasury for Tax Administration. Working day and night and were partnering with other late. Agencies as well. It hurts us. We instruct our agents when you hear from a victim, we spent time with those victims. Hear those stories. And get as much information as we can. We have an Ongoing Investigation at this time. I would hope that in the near future you can describe the successes. Of information, its the stolen identify of identify refunds fund. They won the 5. 1 billion dollars of fraudulent refund is to identify thieves in 2013. This type of fraud is usually not defeblingt. Result the government wants to damage funds which is no easy task. Did you have any discussions . This type of fraud earlier. By Opening Statements by the witnesses and the Committee Members. One of the challenges that the criminals are out there watching the International Revenue service. Yes, i heard. 334 building. Its a right target for them. As the i. R. S. Continues to try to advance it filters. The criminals change because its such a look cra active information. And recommend our additional or approved sell vers. It continues to be a major challenge to keep up with the criminal inside other crile. Thank you very much. This has been a superb panel mr. Chairman. Thank you for the wonderful work. Particularly for older people. I think you know those are my roots. Im really glad. I want to ask you about this question. On the force government. Because it looks to me and you mentioned that youre telling that ill leave 40 scams. A lot of them are originating overseas. Like this is essential. And youre conducting an investigation. Lets talk about some of things that we ought to be looking frut a stite. Will they be in no, sir the second is whats the appropriate for role for local Law Enforcement because you can go after the money runners who collect the payment. Scombr theyre going the see money runners to collect the present. Those who im an. In terms of medicated. But tell us a little bit and nothing will compromise your investigation. Tell us a little bit about what question be looking at that will give you more tool to fight particularly the ripoff artist that have done so much damage from overseas. Thank you so much. First of all, were getting their hands. Theyre agreements or working relationship would have various force. And we would ask the help for that. The problem were seeing now is that because theres been money paid. Were seeing every eever in this crime. Ago we think its important were now starting the original ideas. I think were on to something. But it would certainly be something we could use some hope down on the road bringing them to justice. Can you tell us a little bit can you just give a little bit of a. Exob i dont know what they are. You. Foreign government which would file back for the nns. Suffering this types of cams. So certainly because it inbudes that would it. In helping out the criminaling. Lets move on to the an thip case because this is won that really showed you dumped real. Of these indisturnable pee. And theyre one of the biggest halte insurers in there. Scombrding and sew milk the way he muss misused. This criminal enterprise were talking about today. Including tax fraud. That raised his for me. Seems to me that blocking this type of fraud. Incroddingably it ss going to fight there. And the state. So i would be interested the panels recommendations on what else we knee do give us a trool. I would like to get enjoying our fall. The officials are knotting their head. Why dont we hear from indiana to keep thing as far as the far right. Well we certainly think about that. So we are lrds are seeing the impabbling pack of that. Is to do it do in terms of access or their system. I think have not. Debloyed. So i think thats one key thing that Corporate America and all of us even at the governmental level need to focus on. In terms of what we can do as a group, i think it goes back to that threelegged stool. More reppedly and more respect ily. We do get information. That we share with one another. But it is not on a timely bay sbiss. I she said theres pay tense. 50 states and many of them doing december spa riss thing. To establish a set of standards from our Software Vendors. I think that could be a great deal in bringing everybody together on the fad por. Well have to for suing you. For holding this important hearings and thank you for the. Think every bill personal Tax Information is exclusive when they file it with the urs and there wont be a false return. I think we know. Have you seen the devastating impact to actually gel on me. So i appreciate 4 and i mope were able to move. One measure for preventing thacks. So the i. R. S. Can verify information from third parties from outside the Social Security administration. I any potential down side. And wow would go over. Sir, thank you. Look at that on a regular basis. But their in the middle doing some work right now. They pointed it out. The fact that it doesnt have an aut maded system. That creates that inhibits their ability to do it. Before issuing a refund. This year was january 20th to jibe with the time the Social Security administration has the w 2 which isnt due until march 31st, i think that would be help. Anybody on that subject or is there any downsides to that approach . Im not aware of the downsides but there are three points that can really affect the fraud issue. One is on the front end which is what youre speaking of. The next one is on the discovery phase which is the transfer of information that occurred back and forth between tax agencies. And the third one the messes that you paid. Any one of those is helpful. But to proicht, you need to approach it in all three areas because if you do that then you can really have a better chance of cutting the frauds down. Thank you. Its been a number of years since congress enacted a taxpayers bill of right. When a taxpayer has a fraudulent return filed in his name, is the recourse with the i. R. S. Sufficient . Again our audit, staff looks a that what the victim experience is like. When they got back. What kind of service . Theyre getting what we see. Were cobbing to look at changes or improvements in their program. You need to make it easier who find themselves in that situation. To get them a system that they need. Its a traumaticish sure. Its been compromised. Theyre very, very upset. Oar im not ready to comment on where were at what theyre doing. I do understand that theres been improvement and they continue to work and look to make that experience better for the system. We have Taxpayers Services division. Got to have a way to grab it without going through the whole state broccoli. And a quiz letter than we send it to be able to awe then kate is the right person. That kind of thing they could consider as well. Have a we to expedite the complaint of Identity Theft. The reasons why turbo tax. Hes a mess. How preventingable is this . I think it has perhaps weve realized that its directly identify but the particular sbeach is when you had the one member. They have taken additional step ps to try to mid gait. But i think were fiding in indiana that fast not just them, but i think the fraudsters are moving they move very with great ability as they impact one. And they have success. And they move to another open door. Thr i think its a. Not limited to any particular ventor or party. Thank you. Thank you, mr. President and thank you all very much. Senator for holding this hearing. We all have stories of our. One of the things i think that we could do under my attention. Ive got some legget on this. The i. R. S. Currently interprets the wall saying. They deent leave but if they find out that you are that the victim they dont even tell you as a citizen that youre the victim of that fraud. So the notion that perhaps mike riding a big taylor. If we cant get if they tor wanted to throw. One step to make sure that the partner is not. I thought about we notify the victim and Law Enforcement. I think we see some nods from the panel there. A second item that we ought to consider and this is something ive been wanting to work on i know the senator walked in briefly. But some level of mandatory data breach reporting. It is a very gray and developing area particularly on the retail side theyve got a data breach. Weve seen continueless indications of data breach. But there is no obligation. There is no standard yet about when a Company Needs to report this information. And i think there needs to be such a standard. And one of things we urged from the banking committees side is that this is an area where theres a lot of finger pointing between the Retail Sector and the bank and the Financial Sector and rather than creating another enter change battle trying to have the Financial Sector and the Retail Sector actually collaborate better. Again, im going to get to a question here. You know it would seem to me as well and one thing that id like to panels comments on is that you know, is there not a way either through the i. R. S. Or in collaboration with the private providers. The turbo taxes this is not just a turbo tax problem. This is not something that can be served by governmenta sbis the. We need the private second twhor has a very vibrant business its all. Why havent we created a single easy to use portal so that when mrs. Smith or the lady in utah theres a single place where you can at least check that whether this is a real claim or not i mean, do you all want i mean, do you want to speak to why we have not had a collapsed in state departments and others, an easy to find site and what would be the responsibility for private providers such as turbotax and others to collaborate with that one single portal. With the main time left there are two issues, one is a notification issue the second one is how does it check to see if the return has been filed. We have realtime notification so we believe that your realtime has been hacked. We dont have the impediments that the irs has. The second is we have an easy system for taxpayers to check whether there system has been filed or not. You go to the Tax Commission website and fill out the authentication issues and then you can determine if your return has been filed. We have done a look service announcements, if you return has been filed and you havent filed it, here is the number to call. Wouldnt be better to have some natural education process since the disproportionate amount of fraud is taking place at the federal level rather than the state level . I would agree as well it is getting the resources and the funding and the players collaborating at the same time. It represents an ideal scenario and we have to strive toward that but we need to get it sorted. Senator i would simple he say it when we are looking at 5. 8 billion an fraud, the Washington Post said this year we saw a 37 fold increase in intentionally fraudulent claims, the ability to have a little bit of resource to fight that and either by administrative change or legislative making sure the irs actually informs people when they know they have been the victim of Identity Theft would be steps in the right direction. Thank you so much senator, i might add that senator grassley is the chairman of the jude of the Judiciary Committee and he asked that i ask this question than we will turn it to another senator harry on behalf of senator grassley senators. On behalf of senator grassley, the irs needs to do more to reduce improper payments for the earned income tax credit, for 2013 about 14. 5 billion in in proper eit see payments were made at about 5. 9 billion for the Child Tax Credit to both of these credits paid tax benefits for exceeding any tax break making them a prime target for anyone looking to participate in tax scams or id fraud. At the same time, the rules governing both of these credits are complex, opening them to innocent human error. The question is this in your opinion am a what amount of improper payments would you attribute to fraud versus innocent taxpayer error, and he suspected at least an significant amount. It is clear that the fraudsters look for any opportunity whatsoever to get at money. They are ruthless in their attempts. The fact they would use credits that are legally available to folks filing tax returns is not a foreign concept, i just dont have that information but i would be happy to meet with my audit staff and get a response to senator grassley. Senator if you would i would like to have that response as well. Senator ive my wife said you need to listen to the message were a woman with a convincing voice informed the irs that i owed them a substantial amount of money and to call a 202 number as quickly as i could. Fortunately, being a member of this committee i realized it wasnt true but the next morning i was doing of free file event and gave him the telephone number. He told me when i gave him the number that this cannot the real because we do not make solicitation by telephone. I thought to myself, i should know that but the American Public ought to know that as well so it would seem like there would be more informing of the American Public to let them know that they are all done by mail because that is a real problem and it was a very convincing phone call. Thank you senator, it is very common and very upsetting when the call comes in and that is precisely why the scam is so successful. We do have partnerships on a low level with the irs and others and this info graphic like the one in front of me which is great and im happy to share it with the committee about the irs imposter scam. It says warning signs, how will they First Contact you, by phone . No. By met email . No. By mail . Yes. That is the point i want to make if the chairman would listen for a second, i want to make a point. One of our problems is we dont have a game plan or a point man to get the Consumer Information out there. We have a department created by the administration called the Consumer Financial protection bureau. It would seem like the secretary of treasury lou this of the a perfect way to take their investigation arm to help people who are victims of his this fraud to direct that to taxes as well. Yes mr. Isaacson, we have touched base with the Consumer Finance protection bureau. The majority of our focus has been with the federal trade commission and the irs. The irs has put out youtube and i will take any Television Interview in front of me, not because i am a ham, but because i believe of would protect one taxpayer that is a good day for us and i am so happy about this hearing because im hoping that this will also get the word out. So when you get those calls please hang up the telephone. I hope director core droit will be as aggressive and protecting people from tax fraud as he is from other fraud. Maam i noticed in your testimony that a member of the medical team at fort benning stole the edification of a number of soldiers at fort benning and tax fraud was perpetrated against them. Did you coordinate once that was determined . That they need to watch out for those who take advantage of their position with the government to steal identity of soldiers. I joined your microphone. Thank you, i joined the department two months ago. I was not involved in those types of discussions but i can report back on what efforts were made. We take seriously any allegations and efforts by offenders and we are particularly focused on the vulnerable members including the military members. As chairman of the Veterans Committee i will take the initiative to do the same thing. If you will do it with dod leadership i will do it with veterans leadership as well. My point is this, each of the directors made a comment about information sharing and that would be a key to stopping it. One of the problems that exist is United States senate and house have not done a Cyber Security bill. In the pending bill we hope will be before us soon we are looking for provisions that will protect the antitrust laws that can flow to the government to enforce anti i hope we can get the message that we are part part of the problem. The quicker we act on that legislation the more taxpayers will be saved from fraud. That is my only editorial comment. Senator casey you are next. Mr. Chairman thank you very much. I appreciate the hearing and i want to thank witnesses for their testimony and presence and commitment to stopping this crime. I am struck by what i have seen in pennsylvania, im sure this could be replicated in many states. This is from a television station in. In the northwest corner of the state, the title of the news article about which they are reporting was the irs phone scams ramp up in yuri and then the other end of the state we have alley by the eastern border of the state. The irs scam widespread in the valley and in my home area of northeastern pennsylvania, the irs home scam reaching more of northeastern pennsylvania. A lot of what you of heard and a lot of what you had direct experience with trying to stop. I would start with the assistant attorney general cerello. Im interested in your assessment. I was in the eastern side of our state months ago with the district attorney, john adams. Mr. Adams was walking through some of the basic challenges and he emphasized among other things that the perpetrators were first highly organized and two often reside in jurisdictions far from the victims and beyond the reach of local authorities and even pointed to perpetrators residing in foreign countries. That is among the many challenges that much of your testimonies pointed to. I dont want to be estimate stick because i do what to get to the part of your testimony we talk about what has been happening with the Justice Department and the success you have had, but there is a sense because of the scope and gravity that we are not winning. And from a National Perspective i want to ask you, how would you assess the war . The Tech Division has a dual role. We prosecute the offenders. We are receiving substantial and increasing sentences. We share information we obtain from these cases with the irs, who is working hard to improve filters and better identify fraudulence. That is the tax divisions role. These cases present unique challenges and we will continue to devote our available resources in this area. I would ask, and i know much of what you say has to be short, if you had to itemize one or two or three action items we could work on resources are other tools you need to do your job what do you hope we would do . Ms. Ciraolo Holding Hearings like today are critical to getting word out to the American Public. Our elected representatives taking the message back to their home state and making sure the information is out there as often and as loud as possible. Many of these scams can be stopped if the American Public is educated, and having a centralized locations for that information is a wonderful idea. It gives me hope that we will see further information in the future. Thank you. What should congress do . I echoed what she said. The scam is so simple couple we would never be able to prevent people from posing as another person. When money dries up, criminals will go away. Bringing them to justice and an historic way is something we want to do, but it is not a solution to the crime. Is more about people not being victimized. Criminals will continue to be agile. The greatest thing we can do is ensure collaboration among groups in providing funding to make sure collaboration can take place. You still have to be able to cut off the vector that is used to receive money. Identification of it is something we have to go i would echoed the comments about education. I travel the state and speak to mostly older adults about this fraud and it is devastating to hear their stories. After they showed them, they say they wish they had talked to me last week. We can get more awareness and education, that would be great. Thank you. I would like to join my colleagues that have been bringing up these issues of Identity Theft, specifically to point out that the 111th congress increased the irs responsibility while decreasing the funding. The irs is now responsible for implementing the foreign Tax Compliance act, in addition to the legal requirements lawmakers will have the irs is being urged to combat Identity Theft, reduce errors and federal tax programs, and generally reduced tax fraud. We need to take this into consideration as a relates to the budget this year and make sure that the resources are there to do this. I am concerned that taxpayers will ultimately we need to get a handle on what is happening in Identity Theft. It was found that 22 of Identity Theft cases, the irs was taking enough steps to resolve the account. Examples include victims not receiving refunds or the irs failing to update the victims address. In fy 2014, nearly 70,000 theft returns were close. Closed. At that rate, 22 , about 60,000 taxpayers were burden by having cases closed and an immature fashion. What do we need to do to fix that . That is a job that would fit in our audit staffs portfolio. When they see how the irs is doing with the Identity Theft program, i was look at the victim interface and how the irs processes the claims and correspondences. I know that auditors are doing work in that area as we speak. We will have this resolved for this tax season . So we are not prematurely closing cases . Unfortunately, it is always in hindsight. The audit team looks at the work that was done during the following year. They need to see how cases were handled. I share the sentiment. Anybody else have any thoughts . It seems we need to do Something Better than have taxpayers affected this way. I agree. It creates anxiety among the taxpayers. One of the things we also have services to work with taxpayers that have been comprised with their identities to make sure they have received comfort and knowledge that the return has been properly reflected and accounted for. We need to do the same thing at all levels. I know that practically every committee has i just ideas of Cyber Security and move forward and if it our committee should look at this particular aspect in making sure that our tax filers are also secure. Thank you, mr. Chairman. Thank you, senator. Thank you mr. Chairman. I didnt want to wrap up without talking about seniors. I think we know how outrageous it is that seniors get ripped off this way. We have millions of older people in this country who are walking in economic tightrope every day, to balance food bills and fuel bills and housing costs, they get ripped off and it is not some abstraction. They really suffer. As we wrap up i want to finish with this what else to think this committee can do to beef up the fight to protect seniors from these ripoffs . That is a great question. Its true that this particular imposter scamp disproportionately affects vulnerable adults, especially older adults, that our home during the day and answer the phone. That is because they grew up during a time when they were taught newsroom not to answer the phone. They were taught it was rude not to answer the phone. I will keep beating the drum of education and awareness. If we can let people know that this is a notoriously awful scam and they should be alert to it it is not rude to hang up the phone. I think that is a wonderful educational tool, especially for older adults. It is very tough. I talked to them every day. It is going to be a struggle but i think the more information and awareness been get out there the better. I always tell people who come to my presentations or call me on the phone to share their stories with one or two other people because i think that personal story, that personal touch from somebody who maybe got that phone call and almost fell victim or did fall victim, let them know what it is important. Thank you for the work you are doing. Thank you, mr. Chairman. Thank you for your testimony. As many have noted, Identity Theft is one of the Fastest Growing crimes in the United States. Not only did the victims who are fortunately low income and vulnerable lose millions of dollars to these schemes each year, they are also subject to months if not years of overwhelming paperwork and credit problems and inconvenience. One constituent of mine who i will refer to as sandra experienced this time a first hand she contacted my office in march, 2013, to request help to restore her identity that was stolen in 2010. She did not receive her refund for 20102012. She was getting nowhere with the irs. After an additional two years of working with her, the irs and the Taxpayer Advocates Office was able to resolve the situation. Is the irs doing enough to resolve cases of Identity Theft and timely manner . Is the waiting period sandra experienced acceptable in your. In your opinion . No, because im a criminal investigator and i know how horrific that experience is for an individual. I can to you that the irs has made Great Strides in trying to be better, faster, and more responsive to victims. One of the things they put in place was in Identity Theft victim pain that, in future years, they use that pin number to validate their identity. My observation for meeting the audit reports that our staff has done, is that they have made Great Strides. What would you say is the status now somebody who finds themselves in a situation like sandra . What can they expect to be the. Of time in which their issue will be resolved . My understanding is that it will be better than it was in Previous Years. Whether or not it is up to par for five years with her experience. What would you say is the average now . One year . Yes, sir. I do not happen information available. I would love to get a from the irs at the end of the day. Let me ask this. A commissioner testified about unscrupulous tax preparers. In response to a question i raised, he said, i quote, the irs is very can turned about unscrupulous tax preparers. I know the irs try to regulate paid taxpayers and was rebuffed by the Circuit Court of appeals, which congress has not explicitly authorized such legislation. I find it strange inappropriate that many states require hair barbers to have a license that somebody filing a very compensated tax returns does not do license. How critical is it for the irs to be able to regulate tax preparers and would doing so reduce the amount of fraud and Identity Theft . I think it is important that anybody that is such an important job in such an important areas such as texan ministration Tax Administration. We work closely with the department of justice tax division. When we come across in a scrupulous tax repairer, we bring them to justice. Scrupulous tax repairer scrupulous tax preparer. Can you quantify for me how much fraud is related to unscrupulous tax preparers . We share your concerns with concern to fraudulent tax preparers. We believe they should be able to prepare an honest and accurate return. We have obtained injunctions against more than 40 fraudulent preparers and we will continue to prosecute those individuals. Do you have any idea how me preparers there are . Senator, i do not have that information. Is it based on complaints or it sounds ago small number compared to the universe of preparers that are out there. Is it based on complaints or the services own investigation . The tax division works with the irs in identifying fraudulent preparers and we, based on the evidence we receive, we follow that evidence to pursue injunctions. You have a number of complaints . Since 2000, we filed over 500 injunctions against fraudulent preparers. Thank you. I want to thank all are witnesses for appearing here. I want to thank all the senators that participated. I think this is been a good hearing. Any questions for the record should be submitted no later than thursday, march 19. This meeting will be adjourned at this point. Thanks to all of you, we appreciate it. I would like to come down and say hello to all of you. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] the u. S. Commission on civil rights holds a hearing today on lesbian, gay, bisexual and transgender employees. The committee will investigate federal protections and how bias impacts hiring, compensation and terms of employment. Live coverage begins at 9 00 a. M. Eastern on cspan two. Tonight on the communicators the fcc commissioner clyburn on their municipal ruling, rock band and their program, a. What i am proposing we do is overhaul the Lifeline Program and make it concurrent and in sync with the information age. Challenge those providers to give more to their consumers. The prices and opportunities have been more explosive for the rest of us and it should be for lifeline consumers. Get those providers out of the certification business. That is the number one problem we have been seeing, it is a vulnerability in the system that we need to plug. Now a look at some of the possible 2016 president ial
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