By John Breyault, National Consumers League
Identity theft is a major problem for consumers in the
United States. In 2011, the Federal
Trade Commission (FTC) received 279,156 complaints about identity theft, more
than any other complaint category. And
that represents only those who knew enough to complain to the FTC. According to a survey by Javelin Strategy
& Research, 11.6 million adults became victims of identity fraud – that’s
the use of one’s stolen information – in 2011, an increase of 13 percent from
the previous year.
Over the past few years, identity thieves discovered a new
and practically riskless form of identity theft – filing fraudulent tax returns
with stolen personal information. In 2011
alone, the Internal Revenue Service (IRS) stopped 262,000 tax returns and $1.4
billion in refunds because of identity theft.
It is unknown how many others slipped through, but surely the problem is
massive. Recently an audit by the Treasury Inspector General for Tax
Administration estimated that identity theft may cost the IRS $21 billion over
the next five years.
Shockingly, a source of much of the personal information
used to commit these scams is the U.S. government itself. Specifically, identity thieves have used the
public availability of the Social Security Administration’s (SSA) Death Master
File (DMF) to steal the identities of deceased citizens and file fake tax
returns in their names. The DMF contains
full names, Social Security numbers and dates of births for more than 83 million deceased
Americans. This data is generally used
by a variety of insurance and financial service firms for fraud prevention and
benefits administration, and is also used by genealogists for research. However, thanks the wide availability of this
information online, identity thieves can easily use the information to file
returns before the families of the deceased file their own returns. The victims’ loved ones often only find out
about the fraud months later when the IRS rejects their own returns.
The National Consumers League has joined with the IRS’s
National Taxpayer Advocate, the SSA’s Office of Inspector General and victim
advocates to call on Congress to better protect consumers from this scam. Among the reforms we support are limiting
personally identifiable information included in the public DMF, restricting
access to the DMF to organizations that can be certified as having a legitimate
need for it, and increasing penalties on firms that misuse DMF data.
We’re also concerned about the impact on living people when
their own personal information is fraudulently used by identity thieves for tax
purposes. Victims can encounter long delays getting their tax returns as they
try to resolve these problems with the IRS. More needs to be done to protect
honest taxpayers from fraud.