Lawmakers renew push for legislation to prevent $5 billion tax ID fraud

04/15/2013 7:16 PM

04/16/2013 7:46 AM

Tax Day is no longer just a deadline for citizens to rush and file their returns.

It’s now a day for members of Congress — Democrats and Republicans alike —to file legislation or announce ways to prevent an estimated $5 billion in tax-identification fraud, which is particularly virulent in Florida and especially South Florida.

The effort by local lawmakers is nothing new, nor is the fact that the measures have died year-after-year in a do-nothing Congress.

On Monday, Miami-area Reps. Debbie Wasserman Schultz, Joe Garcia and Ileana Ros-Lehtinen all promoted legislation to put an end to the practice. Florida Sen. Bill Nelson announced a bill last week.

“Something needs to be done,” said Jon Simpkins, a Miami-Dade businessman who appeared with his wife, a tax-ID fraud victim, at Garcia’s press conference.

It took the Internal Revenue Service until April 8 to supply the family their tax-refund money from last year — a week before this year’s tax-filing deadline.

“I’m surprised they haven’t fixed this yet,” Simpkins said, detailing the delays and difficulties of just getting the IRS to do its job.

But the delay in fixing the growing problem isn’t just a window into the problems with the IRS. It’s an example of a broken Congress that struggles to accomplish the most-basic of tasks — including an issue members of all parties agree on: Stopping fraud.

Last year, for instance, Sen. Nelson’s crackdown bill stalled and died in the Senate because leadership said it didn’t want to deal with any new tax issues or tax reform — except for figuring out what to do with the then-expiring payroll tax cuts and the so-called Bush tax cuts.

So even though Nelson’s bill was more of a fraud-fighting proposal, it was considered tax legislation. And it was bottled up by the advent of the so-called “fiscal cliff” and budget-sequester negotiations. The bill could face another challenge this year: the banking-and-credit industry.

Nelson wants to make it tougher for thieves to get tax refunds electronically direct-deposited on prepaid debit cards. The cards have become increasingly common ways for regular citizens to get their returns credited to a bank account electronically. But, because the cards can be purchased by phone or internet and leave few fingerprints, scammers use them as well.

Tax ID fraud is simple and lucrative. Thieves purchase Social Security numbers and names of people on the black market. Then they download tax forms electronically, plug in the stolen information and file false returns. They request refunds be sent to prepaid cards or, less often, by check.

The scam is usually pulled in January and February. Most citizens file weeks or months later. If someone used their information on a tax form, the IRS then refuses to instantly pay the citizen as it did the scammer. Victims then wait for months or, in Simpkin’s case, almost a year for their refund.

Broward Sheriff Detective Mitch Gordon warned that cracking down on debit cards won’t stop the crime entirely. But he said the cards are a good way to steal.

“One time, we had one guy who sat at a Western Union machine for six hours just putting in debit cards, putting in debit cards,” said Gordon, who estimated the office has had 400 complaints this year.

The Miami area is the top tax-related identity theft area in the nation, and Florida has nine of the top 10 cities for the fraud.

South Florida accounted for 35,914 identity-theft complaints in 2012.

“It has happened to so many people,” said Rep. Garcia. “It happened to me.”

Garcia’s bill isn’t as sweeping as Nelson’s. It would change the law to forbid the printing of a person’s entire Social Security Number on a W-2 tax form, a major primary source for thieves who obtained them from unscrupulous employees or employers.

Wasserman-Schultz, a Democrat like Garcia, wants to increase penalties and make federal prosecutors prioritize tax ID cases.

Rep. Ros-Lehtinen, a Republican, is co-sponsoring both bills.

"These bills focus much needed attention to identity theft, a problem that is clearly not a victimless crime,” Ros-Lehtinen said in a statement.

Another Republican Rep., Mario Diaz-Balart, hasn’t studied the legislation but has held IRS officials to account in budget hearings. He tacked on an amendment to a budget bill that requires the agency to better track tax ID theft cases.

With such bipartisan support for such an important topic, Wasserman Schultz, the Democratic National Committee chairwoman, said she hopes something will pass. “It seems like a no-brainer,” she said.

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