This past weekends Times cover story describing the dramatic rise in identity fra ud targeting the United

States Treasury is old news to tax professionals. Its no secret that the IRS needs additional funding. Tax fraud is directly related to t he IRSs need for a bigger budget. In her 2011 Annual Report to Congress, Taxpayer Advocate Nina Olson identified t ax-related ID theft as one of the most serious problems facing taxpayers, noting that it was the premiere reason taxpayers sought her offices help. As explained by Ms. Olson, organized and not-so-organized criminals have sought to profit off the taxation policy by submitting bogus refund claims and often by swiping and u tilizing the identity of another taxpayer. Each year, the IRSs task in identifyin g these claims has come to be more challenging, with the inevitable result that some fake claims are never identified and many valid claims are erroneously held up, imposing significant burden on truthful taxpayers. Ms. Olson added that ID t hieves frequently file multiple returns using Social Security numbers (SSNs) bel onging to others and, by the time the actual taxpayers eventually file their retu rns may be blocked because their SSNs have previously been utilized for the same year. The IRS processes roughly one hundred million taxation estimates each year, the majority of which are filed in a short window, with many taxpayers depending on a quick turn-around of their refund claims. According to the Times article, the Treasury Dept.s Inspector General for Tax Administration recently testified that while the IRS noted 940,000 fraudulent returns in 2010, thereby avoiding paying out $6.5 billion to ID thieves, it missed an extra 1.5 million fake returns, whi ch resulted in more than $5.2 billion in fraudulent distributions. Not surprisingly, Congress appears poised to make a response to the identity the ft explosion by toughening the criminal penalties for those caught filing fake r eturns. The incremental deterrent effect of such enhanced penalties wont extermin ate the problem anytime soon. Meanwhile, the IRS must continue to throw scarce r esources at safeguarding prevention from the increasing number of fake claims wh ile limiting the fiscal and emotional costs and lost time suffered by the taxpay ers. On the positive side, the Times reports the IRS has already identified 2.6 milli on fraudulent refund claims this year, plenty of which are due to ID theft. The improved detection has been attributed to an increase in staff whose job is to t arget ID theft, distributing PINs to prior victims, and technological advances. Unfortunately, the IRSs filters engineered to reveal ID theft are both under-incl usive (resulting in fake claims being paid) and over-inclusive (resulting in del ays in paying valid refund claims, often to taxpayers who rely on their refunds for necessities). Given the IRSs budget was cut by roughly $300 million last year , devoting resources to combating ID theft may take funding away from other impo rtant areas. Perhaps rather than depending on the questionable dissuasive effect of greater criminal sanctions, Congress should think about increasing the IRSs b udget, thus giving it the time and resources required to handle ID thieves witho ut neglecting other enforcement priorities. Perhaps youve failed to file taxes in the past and face IRS problems this year. I f so, dont hesitate to call the tax professionals at JG Tax Group today to resolv e any issues you may be having.