WASHINGTON, D.C. — U.S. Sen. Susan Collins of Maine is proposing legislation aimed at preventing billions of dollars in tax refunds each year from going to thieves instead of the taxpayers expecting the refunds.

Collins introduced her bill, the Taxpayer Identity Protection Act, in the Senate on Monday, the first day taxpayers could file returns.

Her bill proposes giving taxpayers who want it — the program would be optional — an IRS personal identification number (PIN) to provide an extra layer of protection against fraud.

The number, known as an IP PIN, is a six-digit number already given by the IRS to taxpayers who have been the victims of tax claim fraud.

For those taxpayers, if a return is electronically filed without their IP PIN or with an incorrect number, the IRS’s system automatically rejects the tax return until it’s submitted with the correct number.

Collins said the IRS endorses expanding the IP PIN program to all taxpayers because the individualized numbers have enabled the agency to reject phony claims.


Last year the IRS issued nearly 3.5 million PINs to victims of tax fraud, up from 777,000 in 2013. Within a month in 2018, the IRS rejected nearly 7,400 fraudulent electrically filed tax claims, and by March the IRS had stopped nearly 1,500 returns filed by paper.

“This shows the system works,” Collins said. If taxpayers have a PIN that must be on their tax return, “it will stop a criminal who would not have access to that specific individualized PIN from the IRS” because the IRS would reject the claim, Collins said.

Criminals have made filing phony tax refund claims in the name of real filers a big business, figuring out it can be “cheaper and easier for them to steal taxpayers’ identities and hijack their tax refunds than it is to traffic in drugs or rob banks,” Collins said.

In 2016 the IRS paid out an estimated $1.68 billion in false refunds to criminals who filed returns using stolen personal information, including names, Social Security numbers, dates of birth and addresses. That’s an improvement from 2015 when the IRS paid more than $5 billion in fake claims.

When the IRS pays a fraudulent tax refund, it means the real taxpayer can’t get a refund until the mess is sorted out — often a stressful and cumbersome process — and the federal government loses the money.

“Thieves make sure to file early, as soon as the tax filing season opens in January, to increase their odds that they can get a refund before the real taxpayer files his or her return,” Collins said. “Once the thieves file the fraudulent tax return, the IRS processes it and issues a refund.”

The IRS currently has pilot programs mirroring Collin’s legislation that offer IP PINs to interested taxpayers in Florida, Georgia and Washington, D.C.

If the legislation is passed, the IRS would make it available to all taxpayers within the next five years. The program would be expanded in phases.

U.S. Sen. Susan Collins of Maine introduced legislation Monday on the floor of the Senate to protect taxpayers. Her bill proposes the IRS give personal identification numbers (PINs) to taxpayers aimed at ensuring tax refunds go to taxpayers and not to criminals using stolen identification information. The move would save taxpayers billions of dollars annually, Collins said. (Submitted photo) 

Comments are no longer available on this story

filed under: