Rep. Matt Salmon introduced last week the Individual Refund Security (IRS) act to amend the procedure for using prepaid debit cards as a method of income tax refund to reduce the fraudulent use of those cards to perpetrate identify and refund theft.
In 2012, the Treasury Department predicted that by 2016, the IRS would have lost $21 billion due to identity refund fraud. What is startling about the use of prepaid debit cards is that criminals have used this method to receive many fraudulent returns. One criminal made millions of dollars before he was finally apprehended by federal authorities, using only the Social Security numbers of American taxpayers.
Currently, the IRS only requires this verification for accounts that raise red flags, leaving a lot of room for criminals to abuse the system and rip off law-abiding taxpayers. This bill would ensure that returns seeking prepaid debit card refunds are all verified by the IRS, with the taxpayer providing information from their prior- and current-year tax return submission.
“Earlier this year, I inquired about the steps the IRS was taking to fight tax refund fraud—a form of identity theft and a growing problem in the United States,” stated Salmon. “I’m still waiting on a response. One thing is clear; the IRS is not doing enough to close a loophole in a refund option that is rife with abuse. My bill would require the IRS to verify the taxpayer’s identity, either over the phone or online, when the taxpayer requests their refund via a prepaid debit card. It’s a surprisingly simple way to combat a clear and present danger to the integrity of our tax system.”