States Call on Congress to Fight Tax Fraud

March 16, 2015 AT 12:00 PM

Identity thieves are growing more sophisticated this year, filing phony tax returns that closely mimic those of legitimate taxpayers and then depositing refunds onto prepaid debit cards that are difficult to trace, state tax authorities and fraud investigators said Thursday morning during a Congressional hearing on tax fraud and tax scams.

Local tax authorities shared details about the fraud they’ve seen this year during the hearing organized by Senate Finance Committee Chairman Sen. Orrin Hatch (R-Utah). Lawmakers and state tax authorities called for more rigorous standards for tax preparation Web sites and for a speedier income verification process at the IRS as possible solutions to help prevent tax fraud.

“These criminal acts are perpetrated by thieves hiding behind telephone lines and computers, preying on honest taxpayers and robbing the Treasury of tens of billions of dollars every year,” Hatch said in his opening statement. “This must stop.”

Along with state tax authorities, the Justice Department and the Treasury Inspector General for Tax Administration testified about the schemes they’ve seen this tax season. A surge in suspicious tax filings this year has highlighted the challenges of tax officials and private tax prep companies as they struggle to keep up with online tax criminals. The incidents raised questions about how much online tax preparation providers such as TurboTax should do to prevent fraud.

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