April 10,2008

Grassley warns of tax-related identity theft, outlines steps to help secure identity

Statement of Senator Charles E. Grassley
Hearing, “Identity Theft: Who’s Got Your Number?”
Thursday, April 10, 2008

Most Americans look forward to each year’s tax filing season with mixed feelings oftrepidation and anticipation. Will they owe more taxes or will they get a refund? But, for a growingnumber of taxpayers, tax filing season has become the source of another fear – that of becoming avictim of identity theft. In recent years, the number of taxpayers who discover someone has usedtheir name and Social Security number to illegally obtain a job or file a fraudulent tax return hasincreased dramatically, although the lack of comprehensive data makes it impossible to know theexact number.

But, there is no doubt identity theft is a growing problem. In my role as a member of theJudiciary Committee, I have supported efforts to increase penalties for those who commit thiscrime. However, as our witnesses today will explain, much more needs to be done to deter would-bethieves and protect potential victims. Despite ongoing efforts to modernize its computers, the IRSremains vulnerable to outside hackers and rogue employees who seek to improperly access taxpayerdata. Preventing unauthorized access to IRS computers should be a top priority.

Another area that must be addressed is the illegal use of names and Social Security numbersby unauthorized workers. Congress attempted to address this issue last year in the immigration billthrough an electronic employee verification system that allowed workers to block their SSN toprevent its illegal use. I have been working on similar legislation to allow every American to blocktheir SSN and I hope to introduce it soon.

Finally, IRS should implement a knowledge-based identity verification system to protecttaxpayers from fraudulent tax returns. For example, taxpayers are allowed to check on the statusof their income tax refund by using the dollar amount of their refund as their password. Taxpayersmay also use the self-select PIN option to file their return electronically by using their last year’sAGI as their password. The IRS should implement similar procedures to protect every taxpayerfrom fraudulent returns. Solving the problem of taxpayer-related identity theft will require acoordinated effort by both the IRS and the Congress. I look forward to working with the agency andmy colleagues in the Senate to address this problem.