Now that Governor Mitt Romney has picked US Rep. Paul Ryan to be his vice presidential running-mate there is little doubt that the budget will be a major issue in the 2012 campaign. While both parties will vigorously debate which path should be taken regarding taxes and spending, one area of little dispute will be the efficient collection and proper refunding of taxes. After all, refunds have their own kind of stimulus effect.
Obviously, no one minds getting a refund, but failure to receive a refund that is owed to you is painful. Worse yet, when it goes to a thief, which has been happening more and more of late, it is maddening.
That's why I was excited to hear there is a bipartisan effort afoot in Congress to accomplish something of major import before the election. The Stopping Tax Offenders and Prosecuting (STOP) Identity Theft Act (HR 4362) was introduced by Rep. Lamar Smith (R-TX), chairman of the House Judiciary Committee, and Rep. Debbie Wasserman Schultz (D-FL). It sailed through the House of Representatives. The goal: stop identity theft, particularly when it is employed to steal tax refunds.
The IRS is getting hoodwinked by identity thieves 1.5 million times a year. Using stolen identities, these criminals are filing fraudulent tax returns, reaping more than $5.2 billion every year in stolen taxpayer money. Treasury estimates that the IRS could issue $21 billion to identity thieves over the next five years. Place your pinkie to the side of your mouth and say, "Twenty-one BILLION dollars." For those of you who are more visual, that's $21,000,000,000. Still need help? Consider the following:
1. That's enough money to fund NASA for a year, with $2 billion to spare.
3. The total "take" here is enough money to fund up to 20 years worth of loan guarantees for efficient, renewable energy projects.
4. Enough money is flowing into those accounts to fund the Federal Highway Administration for more than 20 years.
5. Taxpayers are being defrauded of enough money to fund the entire Food and Drug Administration for almost five years.
6. This is enough cash to fund five and a half years' worth of Homeland Security disaster preparedness grants to states and local communities.
7. If these stats weren't enough to grab you, here's something scarier: The IRS didn't know it was happening. The long-held custom of allowing individuals to file their taxes starting in the middle of January even though employers are not required to report income until March 31 is to blame, in part. Scammers exploit that three-and-a-half month window to file tax returns in the name of identity theft victims.
Furthermore, according to the Treasury, some of the opportunity is being created by modern conveniences. As the IRS has become more efficient by eschewing paper refund checks for direct deposits, often in the form of debit cards, criminals have fewer hurdles to clear to cash in on the identities they steal. Finally, the fact that multiple refunds can be deposited into a single account also eases things for identity thieves.
[Related Article: Congress' Profound Failure on Cybersecurity (And Why You Should Care)]