Why the IRS needs to stop letting taxpayers use stolen Social Security numbers

Agency's failures to address criminal acts shouldn't be viewed through political glass

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While you’d nev­er know it if you lis­ten to politi­cians on the right and left argue, there are some truths out there, things that don’t yield to debate. I’m talk­ing basics, like it’s eas­i­er to walk through an open door, and the Inter­nal Rev­enue Ser­vice shouldn’t be in the busi­ness of pro­vid­ing open doors to per­va­sive forms of fraud.

Adam Levin, chairman and co-founder of Credit.com and IDT911
Adam Levin, chair­man and co-founder of Credit.com and IDT911

Are you rolling your eyes? Well, it’s hap­pen­ing once again at everyone’s favorite punch­ing bag, the Inter­nal Rev­enue Ser­vice. Grant­ed, past fails haven’t been intentional—whether we’re talk­ing about the “Get Tran­script” hack that affect­ed 700,000 tax­pay­ers or this year’s E-File PIN attack that involved more than 464,000 unique Social Secu­ri­ty num­bers. There was incom­pe­tence and a lack of far­sight­ed­ness in those instances, for sure, but the lat­est wrin­kle at the IRS has the agency turn­ing a blind eye to crime. It has been hap­pen­ing in broad day­light with­out the slight­est twinge of wor­ry that maybe some­one should, you know, maybe do some­thing about it—that is, until this month.

Undoc­u­ment­ed work­ers using stolen digits

For­get about Pres­i­dent Obama’s “path to cit­i­zen­ship.” For­get about “amnesty.” This goes beyond par­ti­san bick­er­ing over a label.

I first became aware of the issue through the lens of right-wing media and almost dis­missed it due to my own polit­i­cal assump­tions. To be fair, it was so poor­ly report­ed and exclu­sive­ly dis­cussed on con­ser­v­a­tive web­sites like Bre­it­bart, All That’s News and the Tea Par­ty Patriots.

Relat­ed sto­ry: IRS slow­ing tax refunds to fight fraud as scams surge

The sto­ry, fea­tur­ing undoc­u­ment­ed work­ers steal­ing Social Secu­ri­ty num­bers to apply for jobs and fill­ing out W-2s under the watch­ful eye of the IRS, was first made pub­lic dur­ing a Sen­ate Finance Com­mit­tee meet­ing, when Sen. Dan Coats of Indi­ana asked IRS Com­mis­sion­er John Kosk­i­nen to explain why the IRS doesn’t inform cer­tain vic­tims of employ­ment-relat­ed iden­ti­ty theft—specif­i­cal­ly peo­ple whose Social Secu­ri­ty num­bers have been used by undoc­u­ment­ed immi­grants to get work or fill out W-2 forms.

I ratio­nal­ized these reports as lit­tle more than “echo cham­ber” attacks on Big Gov­ern­ment. But a week lat­er I read about it in The Hill. There it was: Kosk­i­nen con­firm­ing that when the IRS dis­cov­ers undoc­u­ment­ed immi­grants have used a stolen SSN to apply for jobs or fill out W-2s but file their tax­es using an Indi­vid­ual Tax Iden­ti­fi­ca­tion Num­ber (ITIN)—a num­ber often pro­vid­ed to undoc­u­ment­ed immi­grants to pay tax­es—they get a pass from the agency.

Accord­ing to the report, this will no longer be the agency’s stan­dard oper­at­ing pro­ce­dure by Jan­u­ary 2017, when the IRS will begin inform­ing vic­tims of employ­ment-relat­ed iden­ti­ty fraud.

While that’s great news, it bog­gles the mind that such a sit­u­a­tion could have been allowed to per­sist. Koskinen’s argu­ment for not imple­ment­ing a solu­tion soon­er was basi­cal­ly that peo­ple who want to pay tax­es should be able to do so because col­lect­ing the rev­enue is in everyone’s best inter­est and that the agency could not find an effec­tive way to noti­fy com­pro­mised indi­vid­u­als while pro­tect­ing sen­si­tive tax­pay­er infor­ma­tion on both sides.

Crim­i­nal claims

While the IRS may be col­lect­ing rev­enue from the undoc­u­ment­ed work­ers who are fil­ing returns, Repub­li­cans on the Sen­ate Finance Com­mit­tee raised con­cerns of these fil­ers actu­al­ly receiv­ing refunds from the IRS fraud­u­lent­ly. In the­o­ry, if an ille­gal work­er gets a Social Secu­ri­ty num­ber, he can file three years of back tax­es and claim the Earned Income Tax Cred­it, pro­vid­ing he can remem­ber all the details of his off-the-books earn­ings dur­ing that time period.

Sen. Chuck Grass­ley, R-Iowa, asked Kosk­i­nen about this the­o­ry and Com­mis­sion­er Kosk­i­nen confirmed:

To clar­i­fy my ear­li­er com­ments on EITC, not only can an indi­vid­ual amend a pri­or year return to claim EITC, but an indi­vid­ual who did not file a pri­or year return may file a return and claim EITC (sub­ject to refund lim­i­ta­tions under sec­tion 6511 of the Inter­nal Rev­enue Code). I would note that fil­ing new returns for pri­or years would like­ly be dif­fi­cult, since fil­ers would have to recon­struct earn­ings and oth­er records for years when they were not able to work on the books. Sec­tion 32 of the Inter­nal Rev­enue Code requires an SSN on the return, but a tax­pay­er claim­ing the EITC is not required to have an SSN before the close of the year for which the EITC is claimed.

IRS actions questionable

When it comes to iden­ti­ty-relat­ed tax fraud, noth­ing is too com­plex if there’s a pay­off. While I can’t say if the sit­u­a­tion with unre­port­ed employ­ment-relat­ed iden­ti­ty fraud as described here has ever been used to make unlaw­ful grabs at Earned Income Tax Cred­its, this is just one ques­tion regard­ing what is doubt­less count­less pos­si­ble crimes that can be com­mit­ted because the IRS decid­ed employ­ment-relat­ed iden­ti­ty fraud should get a pass for the sake of revenue.

The bot­tom line is that if it can be imag­ined, it can be achieved. The fact that the IRS has essen­tial­ly looked the oth­er way when it comes to the unlaw­ful use of per­son­al­ly iden­ti­fi­able infor­ma­tion in the face of our iden­ti­ty crime Armaged­don is inexcusable.

At the end of the day, this has to stop being viewed as a polit­i­cal issue. Repub­li­cans will blame the sit­u­a­tion on Pres­i­dent Obama’s “amnesty” poli­cies geared toward get­ting undoc­u­ment­ed immi­grants inte­grat­ed as tax­pay­ers (maybe), Demo­c­ra­t­ic vot­ers (prob­a­bly) and wel­fare recip­i­ents (for sure). In oth­er words, the whole enchi­la­da. Democ­rats eschew the amnesty label, pre­fer­ring to talk about “a path to cit­i­zen­ship,” with the very seri­ous goal of cre­at­ing a safer, oppor­tu­ni­ty-filled world for immi­grants who will (most like­ly) vote Democratic.

The prob­lem: Nei­ther par­ty sees it as an epic fail.

Adam Levin is chair­man and co-founder of Credit.com and IDT911. His expe­ri­ence as for­mer direc­tor of the New Jer­sey Divi­sion of Con­sumer Affairs gives him unique insight into con­sumer pri­va­cy, leg­is­la­tion and finan­cial advo­ca­cy. He is a nation­al­ly rec­og­nized expert on iden­ti­ty theft and credit.

Full dis­clo­sure: IDT911 spon­sors Third­Cer­tain­ty. This sto­ry orig­i­nat­ed as an Op/Ed con­tri­bu­tion to Credit.com and does not nec­es­sar­i­ly rep­re­sent the views of the com­pa­ny or its partners.

 More on iden­ti­ty theft:
Iden­ti­ty Theft: What You Need to Know
3 Dumb Things You Can Do With Email
How Can You Tell If Your Iden­ti­ty Has Been Stolen?