Stop Employment Related Identity Theft
Senator Dan Coats
What if your identity is stolen and the federal government knows about it but does nothing? For hundreds of thousands of Americans, this is exactly what has occurred.
This situation arises when undocumented workers steal the Social Security numbers (SSNs) of American citizens in order to illegally obtain a job. Undocumented workers are issued an Individual Taxpayer Identification Number (ITIN) to file taxes, but they cannot use an ITIN to apply for a job. So instead, many will attempt to use a stolen SSN and someone else’s identity to obtain a job.
Employers then will send wage information based on this stolen identity to the IRS and the Social Security Administration (SSA) on a W-2 form. When the time comes to file taxes, undocumented workers will file a tax return with their own name and ITIN but attach a W-2 with an obviously false identity.
The IRS can easily spot this theft because the ITIN at the top of the return does not match the SSN on the W-2. But instead of treating this situation like fraud or theft, the IRS calls it “borrowing.”
The agency acts as if these are routine tax returns and sends refunds to the identity thieves. And worse, the IRS does not notify the victims of the theft and orders its employees to remain silent.
In 2015, IRS whistleblowers stepped forward to expose this policy to a local Indiana investigative reporter, who shared their stories with me. Their situations varied, but the story was the same for each – innocent taxpayers received threatening letters from the IRS that accused them of not paying taxes on income they never saw. One victim could not get children’s health insurance because the SSA thought he earned too much income after the SSA received a false W-2.
Over the last year, I have been working to solve this problem. During a Senate Finance Committee hearing, I questioned IRS Commissioner John Koskinen about this disturbing situation. To my surprise, he was dismissive and essentially said that it is the job of the IRS to collect taxes but not to address this form of fraud, which he called “borrowing.”
When I pressed him about the impact on victims, he promised a meeting with the IRS. That meeting only exposed the breadth of the problem. The IRS identified 200,000 new cases of employment-related identity theft last year, but it did not notify a single victim.
That number is likely understated because the IRS does not examine all types of returns for this kind of fraud nor does it keep track of those who are repeatedly victimized over a number of years. Also, the IRS does not let the SSA know about false W-2s to prevent victims from losing Social Security or other benefits they are entitled to receive.
Commissioner Koskinen returned to the Finance Committee in April, and armed with additional information, I related all I had found and discussed with the IRS since the last hearing. If authority needed to be granted or cooperation streamlined, I wanted the Senate to be in a position to help. Again, the Commissioner adopted a dismissive attitude, claiming that most of these SSNs were “borrowed from friends and family.”
Those comments were not well received by the public. One day after the hearing, the IRS notified my office that beginning next year it will change its policy on notifying victims. While this is a welcome step, there are still several gaps that leave victims exposed.
To fill these gaps, I introduced an amendment to protect victims of employment-related identify theft that unanimously passed the Finance Committee. This legislation would require the IRS to notify victims, rather than leave it up to the IRS. It would provide steps that victims can take to protect themselves and offer IRS victim protection measures. It also would require the IRS and SSA to communicate with each other about these cases so that victim earnings are correctly reflected by both agencies. I am committed to enacting this amendment into law.
There also is more to do to prevent this kind of fraud from happening in the first place. While lawmakers may disagree on whether undocumented workers should be allowed to use another person’s identity in order to get work, the one thing we should all be able to agree on is that innocent victims of this theft must be protected.
Sen. Dan Coats is a Republican from Indiana.