TIGTA: IRS Missed More Than 500,000 Employment Identity Theft Victims

By:
Chris Gaetano
Published Date:
Jun 23, 2017
IRS

The Treasury Inspector General for Tax Administration (TIGTA) said that employment identity theft, where someone steals someone else's Social Security number to gain employment, is a much more widespread problem than initially thought, according to a recent report. While the IRS does have processes in place to catch such acts, TIGTA said that it none the less failed to identify 558,071 people as victims of employment identity theft, even though identity thieves electronically filed tax returns using the victims' Social Security numbers.

TIGTA reached this conclusion after reviewing 1,330,998 e-filed returns with a mismatch between the ITIN and Social Security number. Of these, 1,153,165 had a valid Social Security number. IRS policy mandates that, for each of these returns, an employment identity theft marker be placed on a victim's tax account. However, said TIGTA, 497,248 of these victims did not have a tax account to set the marker for, while 60,823 simply did not get marked as required. 

In response, TIGTA recommended that the IRS:

1) develop a process to notify the parents and legal guardians of dependents whose SSNs were misused;

2) correct programming to ensure that the identity theft marker is placed on all victims’ accounts for ITIN/SSN mismatches on electronically filed tax returns;

3) place the identity theft marker on the accounts of the 60,823 victims;

4) require ITIN paper tax return filers to attach Forms W-2 to their tax return;

5) develop procedures to identify employment identity theft on paper ITIN returns and add the identity theft marker on valid SSN owners’ tax accounts;

6) ensure that the identity theft marker is placed on taxpayers’ accounts when the Taxpayer Identification Number Perfection unit determines an ITIN holder, rather than the taxpayer, earned the income on Forms W-2; 

7) develop a process to notify the Social Security Administration when ITIN/SSN mismatches involve an ITIN holder using a victim’s SSN and full or partial name to commit employment identity theft;

8) Establish a process to ensure that an employment identity theft marker is placed on accounts of SSN owners for whom the Taxpayer Identification Number Perfection unit associates income with an ITIN holder; 

9) Notify the SSA of the income not associated with the 16,597 victims we identified; and 

10) Develop a process to send a Form 9409 to the SSA when ITIN/SSN mismatches are identified during tax return processing and the mismatch involves an ITIN holder using a victim’s SSN and full or partial name to commit employment identity theft.

The IRS agreed with recommendations 2, 3, 4, 6 and 10. 

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