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tv   Capital News Today  CSPAN  June 2, 2011 11:00pm-2:00am EDT

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reports suggest the prevalence of a tax on small and mid-sized businesses -- of the attacks on small and midsize businesses is even higher than large companies. >> high-yield back to the chairwoman. >> we're being called back to the floor for a vote. the chair now recognizes mr. olson for five minutes. >> i think the witnesses for your expertise. in my home state of texas, we experienced a serious and troubling data breach earlier this year, names, addresses, social security numbers, and in some cases birth dates and driver's license numbers were posted on bankert bid on a public server. in response, the state attorney
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general and fbi launched a criminal investigation into the data breach. unfortunately, these are happening more frequently and they cost businesses tens of billions of dollars annually. the federal trade commission estimates that 9 million individuals and the united states have their identity stolen every year. this is the equivalent of approximately 17 identity stolen every minute. it that means during course of this hearing, 85 identities across this country will be stolen during my testimony. there was a tool created for texans to receive updated information about a data breach, along with recommended security steps to take. the actually put up a toll-free number, and the comptroller is offering credit monitoring at no charge. there are as moscoalso frequentd
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questions. but this burden that is placed upon the victims of this breach, they have to spend their own time and rolling and credit monitoring, placing fraud at warnings, placing credit reports, and so on. given the breeches your companies have experienced and all the heartache and lost revenue for all the customers, all the resources you had to expand to determine how these breaches occurred, you think there is a clear need for a comprehensive federal data breach notification law that would create a uniform standard and preempt the current patchwork of state laws? >> i believe it would be great if we had a federal data breach notification law that would preempt all the state lost so what would be straightforward and companies would know exactly what they needed to take care of, that would preempt the state laws.
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>> sony is supportive of such legislation and we knew we'd be happy to participate in the formation of that. >> why did you choose to contact law enforcement, the fbi, and secret service as an issue became aware of the work -- of the incident? is this typical for epsilon? >> we knew quickly there had been some data that had been down loaded, taken by somebody who was not authorized. therefore, it was a criminal act, and our mind, and we want to look for law enforcement to help us go after the bad guys. >> i know you and playstation had a heck of an april, but why did you conclude that notifying customers by the playstation blog was one of the best, fastest, and most direct means of communicating with customers? >> in the years playstation has
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been in business, at this blog has been a popular source of information for our customers for all affirmation related to playstation, and we know it is a good way to get the message out to the customers quickly. that was not the only way we communicate with customers. we had public announcements through other channels, as well as direct e-mail to the consumers following the breach. >> one final question as for how you have prepared for this. epsilon had it reacted and had a plan in place, and i assume that is the same for sony. >> absolutely. >> is there a specific and to be in both of your companies that is proactive, that looks through the security systems to try to penetrate, find weaknesses, taking a proactive approach? >> a successful approach to
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security involves both proactive and reactive approach is, and we definitely have those resources in place in my company and in soda corp. as a whole. -- and sony corp. as well. >> epsilon has that as well. >> i think the what this is it for the time. -- i think the witnesses for their time. >> the chair recognizes mr. harper for five minutes. >> why did it takes on the approximately seven days to notify customers that their personal data had been compromised? >> the basic essence was to find the right bowman's between notifying customers as soon as we had some sense something had gone wrong, but not being irresponsible in the notification and creating undue stress or concern within the customer base. we began an immediate
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investigation and were able to notify customers within a couple days we had an unauthorized external intrusion, but it took several more days to be able to clearly discern what information had been taken. even at that point, we were not able to rule out the possibility that credit card information had been taken. nevertheless, we made a public statement regarding the potential of those losses. >> how long was it before any customers got notification? >> we first discovered the unusual activity on the 19th, we shut down the network on the 20th of april, and we notified consumers on the 22nd of april. >> did you notify all consumers at that point? >> at that point, we were intensely involved in the investigation to try to figure out what to notify customers about. at that time, we notified utilizing the blog that we
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believed there had been an intrusion. beginning on the 26, when we made a lot of public announcements about the pacific -- about the specific information that had been lost, through new channels as well as the correct e-mail campaign to the customers, detailing the information about the nature of the loss. >> how many notifications did each consumer receive? >> in regard to the sony playstation bridge, that should have been approximately 77 million emails cent -- with the sony playstation breached. we notified by the blog on the 22nd. we provide updates there on a regular basis, the state of affairs, and i believe the terms of the e-mail notification about the potential loss of data, that was a one time event. >> do you believe the news that
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you passed on, looking back, was it done quickly enough? >> we tried very hard to find the right balance. i believe if we had responded earlier, it probably would have been irresponsible. even to this day, we question whether we should have taken more time to finish the investigation with regard to the credit card information. i believe we struck the right balance, but it was a tough call. >> i know you sent a letter may 3 saying there was no evidence of misuse of customers' personal information that was accessed during the breach. we are a month past, is that still the position? >> when we talk to the credit card companies, they have still told us that they see no signs of unusual activity related to this breach. >> the do know where it originated? >> unfortunately, we don't. we're trying to figure that out with law enforcement, but we do
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not know. >> we hear media reports, speculation, there was one report that initially suggested that amazon's service may have been used. is there any accuracy to that? >> i know the fbi is investigating that report, at this time i do not have any other additional information. >> did it sony online entertainment, sony network entertainment, are they using the same server models and security protection and in the software? >> we comply with the same types of industry practices and are subject to the same policies as far as being part of sony corp. the specific architecture of those is probably specific because of the types of services, but across the industry, most internet service providers are building their services at of a largely
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basically the same components, so there is probably a lot of commonality. >> at this point, we will recess the committee ought to have covered the floor for a vote. our return is to return as soon as we can from the votes. it should be about 45 minutes, it is my guess. the subcommittee stands recessed until after the last vote on the floor. [captions copyright national cable satellite corp. 2011] [captioning performed by national captioning institute] the subcommittee will reconvene and come to order. i wanted to thank you for indulging house and apologize.
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that has been a slight change of plans, with the minority headed to the white house for an important meeting with the " president. we have agreed that we would conclude questions. before that, however like to offer you the opportunity to give us final thoughts you may have and recommendations for legislation as we move forward in the process. i recognize each of you for five minutes to do that. and you don't have to take the full five minutes if you like, but the time is yours if you would like it. >> think it. -- thank you. obviously, we would greatly appreciate the opportunity to work with you and your staff and any members of your subcommittee to create a national data breach notification standard. the details within it would have to be worked out as we think through all of the ramifications, and i would not be the only one with experience, but we would love to work with
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that. >> i want to thank you for the opportunity to speak today and thank you for all the work you have done with intellectual property protection. this is a critical part of the work we're trying to do to build and grow our business. as you have heard in our testimony today and in the private session where we shared more tactical details regarding the breach, yesterday, despite taking what we believe to be extremely inappropriate and substantial steps -- extremely appropriate and substantial steps to build a secure network, hackers were able to get in. the thing that is frightening about this is it is easy to focus on that sony and look at the things we might be up to do in the future to strengthen our network. the reality is it because we aren't all building our networks from the same basic ingredients, -- if we are all building our networks from the same as
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ingredients, if there is a weakness and a component from the friday of vendors that we all build our products from, there is a problem. we're working together as industry to try to strengthen our technologies, but i think the conclusion that i will leave you with today is that without further assistance from the government, i think we will all have a world of hurt in this internet economy, and we would really appreciate and request your assistance. and regarding specific legislation, we are also supportive of this and welcome the opportunity to contribute and speak to you for the regarding this development. thank you. >> i thank you both very much. i like to address the comment about which you protect your intellectual property, and i commend you on your answer. i am glad that you get it then. too often people are afraid of being hacked and retribution because of the decisions that you make. >> a can be a lovely place.
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am i applaud you for that, and i think before the spirit of cooperation. the committee is very excited about the opportunity to craft good legislation. we have the opportunity now to make certain that the future cyber attacks will never again be a silent crime. i like to remind all members they have 10 business days to submit questions for the record and ask what this is to please respond to any questions they received. and -- and i asked what this is to please respond to any questions they receive promptly. this hearing is now adjourned.
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>> up next, the head of the irs apologizes to taxpayers who used the e-file program who were the victims of identity theft. and a look at the presidential bid in new hampshire with but romney. >> one up "washington journal," we talked to randy forbes about the ongoing operations in iraq and afghanistan. and charlie rangel joins us to give us an update on the debt
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ceiling and budget talks. that is at 7:00 eastern on c- span. it later on c-span3, house efforts to deter terrorist threats. live coverage from the house oversight subcommittee on homeland security begins at 10:00 a.m. eastern. >> douglas shulman testifies about taxpayer identity theft and apologizes to the victims. some of those victims to testify that this house oversight hearing, which is about two hours, 10 minutes. >> this hearing of the subcommittee on financial management will come to order. i appreciate everybody's flexibility as we shall both the floor schedule and waiting for the full committee's hearing to conclude. the purpose of today's hearing
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is to shed light on the growing problem of identity theft related to hackers. each year, thousands of taxpayers fall victims to criminals who steal their identities and use their personal information to claim fraudulent tax refunds. i will submit my full statement for the record, but i summarized three primary areas of focus. first, the issue of internal controls at the internal revenue service and the need for the controls to be dramatically improved to prevent fraudulent conduct from taking place, to prevent american taxpayers from being defrauded of millions of dollars each and every year, to focus on prosecution of these criminals, who engage in this fraudulent conduct, to make sure the message is sent that if you defraud the american taxpayer, the american people, you'll be held accountable. at third, that we do a better job of assisting the hard- working, law-abiding american citizens who are victimized by these criminals and then not
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afforded the level of care and assistance that needs to be provided to them by the federal government, especially in the case of the internal revenue service, to ensure these law- abiding citizens are not victimized a second time by the port assistance or treatment by the irs. i will submit my full statement for the record. with that, i yield to the ranking member. >> thank you very much. i will do likewise by submitting my full statement, and just indicate i am really proud the witnesses are coming forth. through this dialogue, maybe we can get to the bottom of this. at the same time, i think it will require additional resources to be able to fix this and make certain that people are not inconvenienced in this
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fashion. i know we can do better. the point is to get where we need to go, we might have to spend some resources to get theire to protect people. we have an obligation and responsibility to do that. i know the solution is on the way, but it will require some resources. i think members of the committee will have to recognize that. at the same time, these kinds of discussions need to take place. with that, i yield back. >> i think the gentleman, and we have done so in a bipartisan way, to continue the dialogue with the irs and all interested parties to make sure we do much better in protecting the american tax payers, protecting citizens a sense this type of fraudulent conduct. rigid protecting american citizens against this type of
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argillite conduct. -- fraudulent conduct. we have had a good number of constituents defrauded by criminals in this regard, the gentleman from florida, i recognize him for his opening statement and submission for the record. >> thank you for your leadership and offering these minutes this morning. i thank you and the ranking member for your leadership. some of you are probably wondering why i am here. well, as some of you know, florida has been one of the most affected areas in the country when it comes to irs identity theft issues. what you don't know, i am sure, i was also a victim of identity theft. i was one of the lucky ones. i can tell you what a nightmare is to deal with.
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it is bad enough going through this dramatic event of having your identity stolen, but then to find out that even a federal agency cannot protect you against identity theft, frankly, is beyond it is heartening. the fact that so many people who this happens to, it is frankly intolerable and unacceptable, and we all agree the irs has been slow, very slow to respond, not only to the individual identity theft issue but also just the overall. i am on the subcommittee that deals with the funding issue. it is something we will also be looking at. but before the committee started, if i may, say what we talked about, we were talking about how he if you use your credit card at a gas station you
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did not go to a lot or you travel or use it twice at a gas station, you will get a call from the credit-card company. the red flag goes up. this happens regularly. obviously, we don't expect the irs to be perfect, but clearly there must be a better detailed plan to prevent fraud issues from taking place. also, a plan to make sure that taxpayers who are fallen victims to this issue are dealt in a quicker and more fair fashion. a journalist from south florida, "the sun sentinel," has written several good articles on the issue. i will have my staff gives it to the members of the committee. i think it would show how bad it is. i would also like to recognize a constituent from south florida,
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sheila. she had fallen victim to this crime with the irs not once but twice. imagine that. imagine going through it again. the irs is aware of it, and somehow the next year it happened again. it tells you they are obviously -- the protocols that are there are not effective. a lot needs to be done. i once again thank you, mr. chair, for your leadership. she was not able to be here today to testify, but she has supplied us with her story in a very compelling written testimony. very respectfully, i would ask you to allow me to submit her testimony for the record. >> without objection, so ordered. >> thank you, for your leadership, and thank you for making this a priority issue. it is a big problem in south florida, nationally, and as bad
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as identity theft is, what happens with the irs and people who work hard and play by the rules and pay their taxes and their refund check goes to some creek, it makes a horrible crime worse. >> the gentleman yields back. just housekeeping, we will recess now because we have about 40 seconds on the floor vote, the first of seven, so the rest of the members a and i will head to the floor, returning with an estimated start time again of 1:45. and with the agreement of our first panel witnesses, we will flip-flop the panels and have the irs commissioner, mr. shulman, when we come back, testifying first, followed by the witness panel. we appreciate everyone's flexibility and willingness to work with us, your patience, and
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that we should have a long. before the next series of floor votes, which will allow us to get into this issue with some substance and make sure that we do better by all of our constituents and citizens to protect them. with that, the hearing stands recessed until approximately 1:45. [captions copyright national cable satellite corp. 2011] [captioning performed by national captioning institute]
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this hearing of the subcommittee on government organization efficiency and financial management will be reconvened. i know our ranking member mr. towns plans on rejoining us coming back from the floor quickly as well. i like to express regrets for a number of my democratic colleagues who plan on being here but are now on their way to the white house for a democratic caucus meeting with the president obama, and asked me to extend their regret at not being able to hear the verbal testimony today, but they're glad to receive the written testimony from all of our witnesses. we appreciate everyone's patience and flexibility as we jumbled the schedule. we're delighted to have with us the 47th commissioner of internal revenue, douglas showman. commissioner, we appreciate your work and the work of your department, and working with this committee, members and
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staff, as we try to address this very important issue of how to better protect american taxpayers from being defrauded collectively by text identity theft, or identity theft that is tax-related. and also to protect each and every citizen who is victimized by these criminals when such fraudulent conduct occurs. in the interest of time, you have been very patient as we have juggled the schedules, as the other witnesses have ben, go right to your testimony. it is practice of the oversight committee to swear in the witnesses. if she could stand and raise your right hand. the use solemnly swear or affirm the testimony or about to give this committee will be the truth, the whole truth, and nothing but the truth? thank you, commissioner, and i would reflect the witness confirmed that both. with that, i turn it over to you
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for your statement. >> chairman platt, thank you for the opportunity to testify before the committee on the important issue of identity theft. before i discuss the irs approach to combat identity theft and assist victims, i just want to personally apologize to the taxpayers sitting behind me. i had a chance to talk to them personally and apologize. i know they had a frustrating experience with the irs. as the head of the irs, which serves 140 million individual taxpayers, i always stress to our employees that we need to shoes each taxpayers us's and understand the specific needs. while most taxpayers have a smooth and seamless experience with the irs, we obviously need to do better with the taxpayers
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who are here today. on behalf of the agency, i apologize and i asked my staff to follow up immediately with each one of them to make sure all of their issues have been resolved. issues have been resolved. let me talk about identity theft for a minute first, i want you to know that we take the identity theft issue around the tax system very seriously. regrettably, by the time we detect and stop a perpetrator from using somebody else's personal information, that already been has compromised. very important to state for the record that all of the examples here today, the irs is not the cause of the identity theft. rather, the terry sensitive information was stolen outside of the system and they use that identity to try to get a tax refund. it's a growing problem
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nationwide identity theft and we've seen a five-fold increase of tax-related issues around identity theft in the last ve years. in 2007 because we saw this as an issue we created the office of data -- information protection and data security. let me briefly highlight some of thections we've taken to try to get ahead of this. first of all, we set up filters and we stopped about a billion dollars since 2008 of potentially fraudulent returns coming in due to identity theft. we've also tried to set up ways to assist victims of identity thefts. we put markers on accounts which uts heightened scrutiny on those accounts when they came through. the key to those markers is setting up the right filters that block the criminals and don't put too much burden on the victims. while not perfect, we've gotten a lot better.
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two years ago, 80% of the returns that were tripped by our filters ended up being legitimate taxpayers. this year that's almost reversed. 75% of the tripped returns ended up being the fraudulent taxpayers. so we're going to keep getting better every year. we've also this year launched a very promising program which is we've given 56,000 taxpayers a p.i.n. when they file the return, it will go through, if you have the p.i.n., if a return comes in with that social security number with no p.i.n., it will be blocked. i really think this is the future and i commend my staff for being in front of this and working on it although it didn't help the folks who did not have a p.i.n. i could go on and on. we do a number of other things. we have criminal investigations. we coordinate with the justice department, the fbi, the federal trade commissio and i'm happy to talk aboutt in questions. before i conclude, let me just
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turn to the written testimony of the witnesses who experienced unprofessional behavior on the part of some of the sisters that they encountered at the irs. i must tell you in all candor that all of my personal experience and the data that i review on a regular basis suggests that our telephone representatives on a whole are extremely professional and courteous. all of our customer satisfaction measures, those measured both by the irs and by external third parties show that wle we run one of the largest phone cters in the world, the irs manages to provide high quality of service with a high degree of curacy. with that said, i take these taxpayers at face value that they had a bad experience with the bad irs and i take this very seriously. i believe the conversations we have with victims of identity
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theft present unique challenges to your assisters. often, it's during the initial conversation with the irs that the taxpayer is told that they've been victimized. as we've heard, these can be very emotional conversations and they're very unlike the majority of calls that we receive on a daily basis with specific questions about your account or the tax law. and so for many of our assisters, especially the ones on our geral toll free line, this may be the first time that they've received a call from a victim of identity theft. so based on this testimony and what i've heard, i'm initiating a thorough review of the training provided to all of our phone assisters to ensure that they have the tools and the sensitivity they need to respond in an aropriate manner to victims of this heinous crime. let me conclude by telling you that i realize that in the process of increasing our efforts to block attempts by
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identity thieves to exploit the tax system, there have been inconveniences and frustrations created for honest, hard-working american taxpayers. for that, i'm deeply sympathetic. as identity theft continues to grow as a problem for our country, we need to do our part in the tax system to assist innocent victims. weedicated significant resources over the last few years, streamlining the processes for innocent taxpayers caught up in an identity theft. these efforts are starting to pay off but we're going to need to keep working on it and you've got my commitment that we're going to be focused from this day forward on continuing to improve our operations in this area. >> i thank t commissioner for your statement. and the commitment you've made as far as going forward. certainly, i'm grateful for your apology for those witnesses here today and all those who have
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been victimized and perhaps have believed they've not received the level of assistance that they should have received, whether they're here today or around the country. and, you know, i think what you said here as far as going forward, you all captured in your april 6th address at the national press club and it was about continuous improvement. that since you joined the irs in 2008 and in your own words, i've made it one of my top priorities to put the irs on a path of continuance improvement to get better. i believe we should perform the best we can today while embracing change that we can perform better in the future and i think this is what this is about. especially when we look at the numbers in this area where we see identity theft-related tax issues jumping about 500% in roughly 2.5, 3 years, 50,000 or so that we're aware have to over 250,000 in the most recent year. and i think that goes to your
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other statement about the training of the staff who are on the 1-800-number that is for most constituents that will be their first point of contact. that the committee made to go back and evaluate and strengthen that training becse as we get more and more of these cases, as we're seeing, that's who's going to get that initial call. and as you refence the written statements of the citizen witnesses who will be testifying a little later today, yeah, their description of the treatment they received is pretty outrageous. and, you know, not putting words in the mouth but quoting them, as we'll hear from lavona thompson. i spoke with the most rude and discourteous person i've ever
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spoken with in my life. another witness after dealing with an irs agent in person, in a local irs office, and feeling so frustrated and how the engagement occurred, i went out to my car and cried. i was very overwhelmed. this is a case where we have individuals who were victimized and, in essence, feeling victimized the second time and your acknowledgement of that and your commitment to go forward to improve the training of your staff is much appreciated. and i'm one as we talked about before, yes, believen the ideals of public service and am grateful for the work of all public servants and that includes all of the personnel at the irs who are out there in the irs and trying to do a good job and the misconduct of certain individuals to paint a bad
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picture of any and all irs agents personnel. we know that's not the case. so as a committee we certainly will be grateful to be keptn the loop as you move forward with these training changes or upgrades so that we can make sure we are doing better with the assistance provided to the victims of identity theft. a number of issues i would like to address with you -- you mentioned the -- the -- about a billion dollars in savings that you prevented from being fraudulently paid out. and the filler system is now identifying of those that it kicked out, about 75% were fraudulent and that would have otherwise been paid out but for being caught. do you have a number roughly in, say, the last three years the best estimate of you've identified what was paid out
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fraudulently and what, if any, of those dollars have been recouped since being identified? >> lete address -- we have the specific identity theft maneuvers that were moving and we have very sophisticated algorithms that block out fraud. we block out 2 million returns every year that never go out. and a bunch of those are probably identity theft 'cause they can be duplicate tins but they haven't gotten an ideity theft marker so we don't know what that is. so we don't have a good number as of today how much potentially that went out that we know was identity theft, but, you know, it's somhing that we're going to work on going forward. the other thing i just would mention -- there were a bunch of statements in the testimony that assumed just because the
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innocent taxpayers refund went out and that means the perpetrator's refund went out. that's not the case. there's a bunch of cases where we get a flag on the first one and we're working that and a second one gets a flag because it's a duplicate. and we have someone who has a purse stolen. someone gets their identity. they sell it to 20 people so we could get multiple filings with the same -- it doesn't mean that any of tse necessarily go out. a lot of times we're holding them all trying to sort out exactly who's who and who deserves the refund. >> i understand you don't have the exact amount perhaps that's identity-theft related in the recent years, is there a number that you have at this point of how many returns were filed that are identity-theft related, whether you know -- >> our cumulativ number is a little over 400,000 since we started tracking those but those
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are the ones that we put the marker on. so, for instance, the ones that are coming in this year unl the case is resolved, you know, the markers are not on it 'cause sometimes, you know, the most common mistake in tax filing is someone not transcribing their social security number so sometimes it's literally is a number. it's not an identity theft it's called a duped social security filing. but the cumulative number over three years has been 400,000 that we've marked as having some identity-theft related. some there's never been a return but we found through other criminal investigation, a cache of information that has a bunch of social security numbers so we'll mark that. and some, the taxpayer identifies some we find the way most of the people who testified found out, which is when they filed they realized somebody else had filed. >> i know one of the issues that you kind of touched upon that comes through in the testimony where fraudulent return was
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paid out, and then the law-abiding citizen submits and, you know, is told it's going to be four, s months or longer. can you address that -- you know, we have cases that have been brought to our attention where a fraudulent return was paid out within two weeks of an e-file being submitted in, say, january or february, then the law-abiding citizen -- and that was based just on the name and social security number and no supporting documentation done in the e-file. they created an employer id and income but then the law-abiding citizen comes forward with all the documentation, w-2's, you know, all the proper id to show that they are legitimate taxpayer -- you know, why is it four, six -- or i think in the one witness used, it was about a year and a half till they got
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their legitimate refund. i know there's a man power issue here but that seems pretty extreme that the victim has to go that long, you know, given how quickly we paid out the fraudulent payment. >> so one thing i just really want to verify because i think there was confusionn both a bunch of the press reports and other things, the first return that came in was received and put into our system. that doesn't mean the refunds were paid out. and so the refunds weren't necessarily paid out in all those but then to address the question of when the real person comes in what would take it so long. one there was a staffing issue and i told you we more than doled the staff so that we can get this addressed. frankly, we didn't know there was going to be this explosive growth and we were trying to balance budget cuts and potential government shutdowns
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and once we found out there was more growth, we threw more resources in this. >> is this just in this current calendar year. >> yes, this current calendar year. we're trying to balance resources as we go. second is, there are cases and one of, i think, the witnesses described a case where the person had, you know -- had their w2, had their employer, had their dependent, all those things -- when you get all of that, identity theft has become a very serious organized crime. and it's one thing -- you get a social security number you file, you probably will trip a filter and get blocked. and if you don't, when the real person comes in, they're obvious but sometimese write to both people and both people come back with a driver's license, with a social security number on it. maybe they've gotten a passport. they know the names of all the dependents. they know what the agi last year was. that usually means that there's some sort of work-related crime or someone has gotten into some
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sort of payroll processing system where they get information, and when that happens, it can take a while to sort through. some of the delay was we had some things sitting on the shelf waiting for people to get to it. we think we've addressed a lot of that by putting more people but sometimes when our analysts get there, they have to start making calls to employers. they have to ask for mor information. and again, this can be 30 people all that they're trying to unsort those cases so those will always take ally long. >> understandably. >> and i guess the other thing i would say is, you know, i did -- i looked into -- there were a lot of public accounts about people and without getting into any taxpayer, there were lots of public accounts that i saw where someone said someone told me it would take six months but we know for a fact they got their refund within a couple months and a lot earlier than that. i think it depends on circumstances. with that said, you know, it shouldn't take nine months. it shouldn't take a year and a half. and we should get better at
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sorting this through. i think the p.i.n. i mentioned is going to be one of the real solutions. everyone testified here want to make sure the p.i.n.ere assuming the pilot will go, their refund will fly through. anyone trying to use their social security will just be blocked. much better than the flag and the filter, which is a step in the right direction but the p.i.n. could be the real solution here. >> and i certainly understand where you have a fraudulent claim, where they didn't just get a name and social security but they got access to, you know, all that information. you know, so they're filing correct status, you know, everything is good other than where the money is going. and i underand those are going to take a lot longer. those where it is just a name and social security number and this kind of comes back to the issue of the training of your staff and how they handle it. that initial saying we're going
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to do this as quickly as possible, hopefully, it will be, you know, you know, a month or whatever you think is e best case scenario but it could be six months but please know, you know, we're going to be giving you regularupdates. and that is part what i would call an internal control on the training side and the follow-through. i really -- when you and i talked yesterday, my wife served on the victims assistance board in why can in her home community a number of years back. and, you know, there's -- when you're dealing with victims of crime, you know, it should be one of our highest priorities in how we handle them because it's not just what they, you know, lost and here the taxpayer loses the money ultimely collectively, the american taxpayers, but it is a financial impact on the law-abiding citizen who s been victimized andor tse who especially are
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really looking to that refund to pay, you know, whatever pressing bill they have, whatever there may -- maybe it will be a financial impact and there's a mental health aspect to it as well. and i think that's what came through to me, not just again in the witnesses we're going to have here today but the other cases, i think, we have 12 cases that we're currently working in my office. and i haven't talked to my colleagues, mario-diaz in florida and around the country, is that, you know, we really look at those individuals appropriately. that they've been victimized by criminals and so, you know, we really need to prioritize how we held out and one of those regular contact between your agency and those individuals once they've been identified so they're not sitting out there waiting soo your knowledge but kind of get those regular updates. i'm going to touch on one other area that you just mentioned
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before i turn to the ranking member, and that is in trying to prevent it, and i appreciate that preventive approach, in fact, in your april 6th statement at the national press club, i appreciated that you're looking at how to be proactive and not just catch them after the fact and do something but to prevent fraud and other misconduct, and i think one of the things you mentioned about trying to have the employer's identification number and that w2 data up front rather than getting it ia sense afterhe fact and then trying to play catch up. and i realize that's a substantial engagement to pursue and i think maybe it was good congressman diaz balart being here as an appropriator on the subcommittee that directly overseas irs, you know, as you looking to make those type of improvements that will prevent
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fraud up front that we engage him in what those fancial aspects may be as far as making those improvements. but you mentioned the p.i.n. -- you know, the filler system and putting flags on, and i think at least one of o witnesses in the next panel testified that they were supposed to have been flagged and apparently were not properly flagged so they were a victim of identity theft a second time regarding their refund. whereas, the p.i.n. approach seems like it would more than likely prevent that. where do we stand in that pilot program? and i think it was 50-some thousand individuals in the rrent year and how quick do you envision anybody identified as even a possible victim of identity theft being able to get that p.i.n. to try to make certain that only they will be receiving their refund? >> so we're really -- we've got all the data now. although people still file after april 15th. they just -- they've gotten themselves an extensn but we've got most of the data in. we're looking at it and are
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parsing it. like i said, i think it's very positive. my desire would be to expand it dramatically. and potentially give it to anyone who's been a victim. we for next year we got to balance that against, you know, all of the demands but i think unless we see something we're not expecting to see, by next year, we're going to try to dramatically increase that. >> you know, my hope is that we can move that -- that direction. in fact, you know, not a witness here today but one of the victims that had submitted a written statement, pamela eslee from york and without objection, i'm going to submit her statement for the record a in the name of full disclosure as i shared with you before, it is a family member -- i'll say my big sister, although she's in the audience. she stands 4'10", maybe that. she's one of these victims. and, you know, because of it
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being a family member i most familiar with how her case played out. and the filter system, you know, is what really worries me. that if we rely on that, while i'm glad it's getting 75% of those that are kicked out are ones you want to catch, is how many we're not catching with the filter system because as ithis case where my understanding, you know, it was a different filing status, a different employer, you know, a different address, a different dependents. i mean, there was one -- what i would call that mario referenced earlier, one red flag after honor that i thought that filter system would have caught and kicked it out, hey, something is askew here. unftunately, it didn't. and when the written returns were received by irs, about a month after the fraudulent returns, nothing happened for another two months until the
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taxpayer, miss lee, then contacted irs saying where's my refund? so now it's three mons after the fraudent return was submitted and paid out in january, two months after the irs received paper documentation that, hey, there's something wrong here. yet, even then nothing had been done. and so that's why i do worry about the filter approach versus getting to the p.i.n. and as a way to maybe better protect. and this may be tooroad a seiment or thought. is there -- the possibility of getting beyond just a social security number for each and every taxpayer. you know, what would be the cost of, you know, the p.i.n. being sent out annually that here's your p.i.n. not just, you know, the half million or so that have been possible identity theft. is that something you're even considering or is that because
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of the additional cost and, you know, would it be effective or not? >> if you don't mind, if i could just address the two things about that you had mentioned. one is the -- that series of filters you said, why didn't it stop someone? >> yeah, yeah. >> i just learned of the taxpayers and obviously i can't discuss individual taxpayers publicly but there's nothing to say it didn't tp a filter or that that refund didn't get stopped. and so we're going to look into all of these, but i will tell you, ke i said, there's 2 million refunds that gets stopped and there's enough indicia there. we change these very year. they're very sophisticated and the crooks keep testing all our tolerance levels but we're very serious of stopping refund raud. >> and i don't want to imply otherwise. as i've said to you, i know you want to prevent every fraudulent
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filing and paynt as much as i do. and i know your department across-the-board shares that and that's why the purpose of this hearing is how do we partner here with you to help you do just that? >> on the -- on the p.i.n. -- i mean, it's an interesting idea. we're, as you know, everybody is in very tough fiscal times. my guess it would be very expensive. we're looking first to expand the p.i.n. to make sure it works. second expand it to the group of people most likely to have one of these problems. right now the social security numbers is what's used. i think it's been an overstatement in some of the testimony submitted today that all you need is a name and a social security numb and you automatically get that refund. there's a lot of things that go into looking at that. with that said, you know, i'm very open -- you know, as you quoted from a speech earlier this year, we should always be looking at how we do it better. and it's certainly something as identity fraud grows, we're
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going to have to figure out how to stay on top of it. >> i do appreciate that it's not necessarily that simple, but i'm looking for -- yeah, i've got too many pieces of paper in preparation for today's hearing. but that is a statement from a conference call with an irs employee stating to committee staff that social security number and name is all you need. you know, the e-file and that it is that simple so that's not just citizens, witnesses making that statement. that is one of your employees saying that to my committee staff. >> well, i'll look into both the employees who are rude to people on the phone and that employee because there's a lot more that goes into issuing a refund than just a name and social security number. >> yeah. it was -- yeah, you know.
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we won't identify the individl here -- >> no, i take it at face value that i'm glad to share that information with you. >> but i'm finding my place here. i'm not finding the exact one but we'll get it to you 'cause that seemed to be what was being conveyed to us. a final question there and then i'm going to yield to mr. towns, is there any conversation -- again, we're looking at ways how to prevent this wrongdoing, to stop the criminals, protect the innocent. you know, i know in some of these cases -- and i don't know if it's consistent or something that you've identified as a consistency in the fraudulent claims, they were filed in january electronically, which i before most americans -- i know i never get a w2, you know, till the end of january -- the last minute from current federal government as my employer or
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from previous employers. is there a consideration that that is a specific red flag? that anybody who's filing electronically in january that we look at with extra scrutiny because, you know, of -- the propensity, you know, they're trying to beat the law-abiding citizen who hasn't yet got their w2's so they have not yet -- or not yet -- i think, i'm generalizing here and i may be wrong that most americans are not able to file till at least the end of january or the end of february until they get their employer information and then go forward and submit everything, that that would be a specific red flag that anybody filing electronically that earlier, you know, would get extra scrutiny? is that something you would consider? >> you know, i guess there's two things about that. one is a lot of the people who are -- you know, the common perception is april is when everyone files. the reality is, you know, our peak starts january/february and there's a lot of people who file who are as you discussed
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earlier, people who are really counting on that money a to go get from their employer because most employers, especially large employers who employyou know, large chunks of lower income workers can make the w2 available earlier. and sohere's a lot of people who file who are some of the neediest taxpayers who really need the money. second of all, as we talked about yesterday, i just want to be -- we have seen no nexus between electronic filingnd this identity theft-tax related fraud because you can get your return in just as quickly by sending it overnight mail to us. and the speed issue a lot of times is about, you know, whether you get a check or direct deposit and we have to send something to fms. so it's again -- everything is on the table and i would certainly look at anything. but usually the time is not the issue because we actually -- the thi that nobody wrote about and, obviously, there wouldn't
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be a hearing and a lot of interest in it, but we stopped lots of people who -- the legitimate taxpayer filed got their refund and never knew anything had happened and then the crook comes ilater and we block those, too. obviously those ones aren't devastating to the victims. so but it certainly is something we look at. what i will tell you is we have technologists, statisticians looking at our screens, refining them year after year, working with our criminal investigators and other people and these -- and i get brief on them all through december to make sure we test them. we test them gets last year's data. we test them throughout the year and so we're looking at these filters very carefully and we're trying to get as jim white from gao testifies, you know, the key to these things is, stop the bad returns and don't burden the
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honest taxpayers. >> am i mistaken that if you file a paper return then you do have to have your w2 -- i thought when you file an electronic return you d't send any w2's in, you know, with that because you're dealing electronically but if you file by paper i thought you then had to file your w2's with the return. >> the electronic return usually has -- you can do it electronically next year. we've been working on our e-file. next year we'll be able to actually pdf any attachment to an electronic return. >> but i meant as far as -- that identity theft is paper or electronic, isn'it harder to do it with paper because you have to have those w2's attached? >> a lot of people get them late. what i can tell you is we look -- we screen with the same material on paper and electronic. >> okay. that's what -- i'mooking for that nexus that you referenced.
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and i would encourage you and if you see anything with the -- with that 75% of those that you did kick out and were fraudulent, you know, that analysis, you know, was a large percentage of them in january, you know, and what percentage of them was electronic if your staff could follow up with the committee on those two specific issues. that would be great and my ranking member has been very tolerant of me going very long here. i yield to the former chairman of the full committee and the ranking member of the subcommittee, the gentleman from new york, mr. towns. >> thank you very much. no, i think, you know, your questioning, you know, i think is just so important to try to get to the bottom of it. and not get involved in terms of a blame game because we're all in this together. i think so your questions i thought were really right on point. and to the point. you know, because i'm always
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concerned about if pele do things and get away with it, you know, then they will almost encourage them to do it again because if nothing really happens -- and then, course, others hear that they did it and nothing really happened so i guess the point i want to ask you -- since 2008, how many prosecutions have there been? >> so i actually don't have -- i don't have the cumulative number, but i nut my testimony and mentioned earlier, >> can we keep the record open so that we can receive that? >> just last year, we took to full investigation and recommended to prosecution and we don't do that unless we've coordinated with the justice department prosecutions of people who had stolen 50,000
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identities that had been used in tax crimes. so when we prosecute we obviously like any other agency, you knowwe've got a very small part of our operation that has a criminal investigation division. we have to spread it across terrorist, financing, offshore tax evasion, any number of things. as this problem has grown, we put more resources a plan to continue to put more resources into it and we try to find prosecutions, a, where we can get the proof. but importantly, that the os that impact large numbers of taxpayers is, frankly, the ones that u.s. attorneys will take and work with us on, et cetera. and so if you look at 50,000, i think the number was actually 6,000 taxpayers who are affected with the prosecutions that we took all the way through our criminal investigation chain, that represented, you know, more than a quarter of all the identity thefts that was identified, which is a pretty high number for any federal or
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frankly state or local investigator to be able to follow up on that percent. >> would you know the rate of conviction. >> what's that? >> would you kno the rate of conviction? a very high rate of conviction. i believe it's 95% but let me get back for sure on the record. >> right. how much of the fraudulent paid money has been recovered from thieves? >> so every year we block billions of dollars of fraudulent refunds. we blocked about a billion over three years with identity theft. i mentioned to the chairman, we haven't tracked specifically identity theft numbers related that has gone out and what we've gotten back. we haven't started tracking that. we plan to as this problem grows so i don't have a number for you, mr. towns. >> you know, my concern is that, you know, sometimes when we on't have the resources, you know, we know there are things that should be done, you know, but we don't do them because we don't have the resources to do
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it and, of course, sometimes in that process, you know, the wrong kind of message gets out. i know that, you know, as the coissioner that you just can't come up here and bang, bang, bang saying you want money, money, money. but the point is i think that when you see a problem that, i think, that it becomes our responsibility here to give you additional resources to be able to go out there and fix the problem because if a person is expecting his orer return and then they don't get it, and then all of a sudden they can't get an answer because really somebody else has gotten it and the frustration around that and the problem, you know, to me is something that we need to really take very seriously, i'm talking about members of the congress as well, and i agree with the chairman. i was so happy that we had one of the appropriators here today because, u know -- and i think if you feel that you need
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additional resources, you know, don't hesitate to make that case because i think at the end, we're going to save money by you doing that at the end of the day. based what i'm hearing and what has been said here. that if we spend it to fix it, then in the long run, we'll be much better off. and i know how difficult it is to make the case for resources especially in this atmosphere and climate. but sometimes we have to do that in order to be able to correct the suation that we now find ourselves in and to make certain that people have the confidence and not to be wried about whether, you know, somebody is going to get my return because of my identity. let me ask you, what department really covers this in your shop? what department -- the name of the department that handles this? >> handles, i'm sorry?
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>> that handles the claims in terms of the identity -- you must have a department that handles that and looks at identity eft. what's that called? >> we have the centralized office of information protection, privacy and security that sets all policies and cordinates. the fraudulent -- most of it is in our wage and investment division that deals wi individual taxpayers. that's where all the service officers are, where we talk with the victims' testimony and our criminal investigation is the arm, obviously, that follows up on fraudulent schemes that we see. >> right. now, was that the department -- i know there's some cutbacks, was that department had some cut back. >> we had some cutbacks in every department of the irs this year. >> because i'm really concerned about making certain that you have the resources that do the job that needs to be done. and that's really -- i think
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sometimes, you know, we are involved in situation where is we have a problem and we know that resources are actually needed to correct the problem, but we do not deal with it. and we're guilty of that here in the congress. so i want to let you know that i stand ready to push to be able to assist you tget what you need to be able to correct the situation because, you know, it's going to grow if you don't. and that's the problem. you see, when people do something they get away with it, they tell others. nd thent gets bigger and it gets bigger and bigger. and then the prlem, you know, becomes one that becomes a lot more costly to be able to handle. so i think that if we can move forward now and correct some of the things that are going, and send a message forward that this is not something that you do. you know, if you do this, you're going to spend time in jail
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because -- and i think that point has to be made because if people do it and they get away with it, they're being encouraged. >> yeah, i couldn't agree with you more. what i'll say and i'm biased because i'm the commissioner of the internal revenue service and responsible for this agency, but this problem is a good illustration of why, you know, i advocate for the right resources for the irs because on one side we need to have the service resources to quickly process the returns and the refds for the victims and on the other side, we need to get the enforcement resources to pursue this kind of crime. the service resources i think are fundamental because every american is expected to pay taxes so this isn't a choice. this isn't an optional department and we owe it to the american citizen to see treat them right. the enforcement resoues are just obvious from an economic standpoint where there's a huge return on investment.
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you know, we return for our enforcement from 8 to 1 to 23 to 1. $23 for every dollar we spend and that doesn't count -- that's conservative accounting that omb and pbo has come up with. that doesn't count the deterrent effect of people seeing it and never doing it to begin with. this is a kind of microsm of why, you know, we always argue this agency is a little different, collecting the money for the government because it has a huge return on investment and a real obligation to serve every taxpayer in a way that's dignified and respects their own individual situation. >> but the problem, mr. shulman, is that people compare you with other agencies in terms of american express -- and they say well, this person went to purchase something with his american express card and they called me, you know.
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but the point is that they can do that because they have the staff, and they have the system in place that they pay for to be able to raise these kind of flags so that's the point i want to make and, you know, because you're going to be compared with them, you know, and, in fact, some of our colleagues have already done that today. and i was on the nor of the house and a guy came over to me and says he doesn't understand the problem because of the fact that he won't talk about in terms of how the credit card -- that company woke him up. he was asleep at 2:00 in the morning and they called him and said, are you making this purchase, you know? but the point is that in order to do that you have to have staff. you have to have resources. and that's the difference. and i told him there's a big interest on that card, there's a big interest on it so, therefore, they can hire staff and do things and say things and we just want you to know that we sit here -- we're not just going
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to blame, but we want to work with you and we think together that we can do better. that's what i'm saying. and i know that in order to do that, we will have to do some things on this side of the aisle. and other than just saying you got to stop it. you know, we have to help you stop it. and i'm prepared to do that. >> i appreciate it. >> on that note i yield back. >> i thank the gentleman. and i'll wrap up quick for you, just a couple of quick follow-ups. one is on the issue that the rankinmember raised on the prosecutions. there was a press story in the "sun sentinel" in florida, end of april, that identified -- and i'll read it verbatim, prosecutions for identity theft-related tax fraud are rare, agents for the internal revenue service who are responsible for criminal investigations have pursued just
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412 such cases nationwide since 2007. now, there's specifically referencing identity theft-related tax fraud. i take it that you believe that's an inaccurate number? >> as i told mr. towns, i don't have the cumulative number with me but i'll get bk for the record. >> if you could. >> but i think the important thing is a lot of these people are committing -- there's one criminal with thousands of taxpayers. that could represent a lot. thathat's not one victim that could 100 victims. >> but that very well may be the number but what i'm tellingou as this pblem grows, we're going to devote more resources and, you know, our prosecutions will -- or our investigations will continue to grow and our recommendations to justice for prosecutions will continue to grow. >> and that kind of follows up with what ed just said. we're an authorizing committee, we're not an appropriation but we're glad to work with our friends on appropriations in kind of two areas that i think you're looking at doing.
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one is your manpower commitment to the victims so that after bein victimized by the criminal, that the government does right by him so it's not six months or nine months till they get their legitimate -- that's a man power issue but also a man power issue of going after the criminals and -- 'cause if that number is accurate 412 cases going from 50,00to 250,000 obviously that's a very small percentage of prosecutions if we're accurate in those numbers. that question on ese procutions, i know, excuse me, on statute -- the irs -- you're understandably restricted pretty significantly in what information you can share with anybody because you're protecting very personal data. an are there statutory restrictions on you that in some way are preventing your criminal
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investigation division in working not just with justice but with local law enforcement because i understand that as with some of the cases, you know -- i've heard about or we're going to hear about today where it's a 3,000 or 4,000 and it's not multipleut one person defrauding using one, you know, name and sociasecurity and information, when that goes into the department of justice and they prioritize all these criminals are going after, that's probably going to go pretty well in that totem pole because of th amount. because for local law enforcement they prosecute shoplifters who maybe stole $100 worth of goods. it's something they know how to do. is there anything that prohibits the agency from working with local law enforcemt so that we can -- wknow who t person is, they don't get the message as mr. towns mentioned, as long as i don't ask too much each i can prospect 3 or $4,000 because
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they're never going to come after me and we're sending that message, hey, you know, i'm good to go. and just don't get too greedy, as long as you don't get too greedy you're safe, i think to combat that we've got to engage, i would contend,ocal law enforcement. i don't know if here today, you know, if there's anything that prohibits or restricts it or hinders it? >> what i will say is i think some of the articles might have overstated the restrictions but there are some restrictions around specific information. we need to give information that's pertinent to the investigation to know where the investigation is going, et cetera. you know, i always people i got sworn in as irs commissioner when i came back to the office the people who talk about the laws around taxpayer privacy were in my office. just as an example of how seriously this agency takes data protection. and there are very restrictive laws because we're holding very sensitive information about taxpayers. we can, though, do coordination with other law enforcement
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agencies. it's not always just, you know, look at our databases and we'll share everything that comes in but there's specific things we could do. i'll be happy to have further conversations about exactly -- where there could be some restrictions. if you don't mind, i also just want to be clear because i've not been clear earlier, when you said 250 cases of identity theft with only 400 prosecutions. >> 250,000 -- >> and those numbers seem skewed, one, is 250,000 was the flag that were put on. we put some of those on because we happened to find, you know, a database. or someone called and said, my wallet was stolen and so those aren't necessarily anything. there hasn't been a crime committed. it's just a flag so that we can put it through mor screening. >> okay. >> and second of all, you know, even though last year it was 116
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investigations, 41 of them ended with recommendatns for prosecutions, that was still 50,000 taxpayers. so the number was more like 50,000 for 200,000, just -- and i don't know that i was clear earlier. >> right. >> 'cause again because of the likely prosecutions at this point are those more large schemes involving laudable or significant number of taxpayer id's being taken so the number of cases might be small that you're prosecuting but the impact is that 50,000 number >> yes, i want to be clear in my explanation number earlier. >> one other item if you could follow up on the record, my earlier questions of those identified in, you know, and kicked out as being fraudulent, you know, that -- how many were e-filed, how many were in january and the issue of how many were asked to be refunded in the form of a debit card versus a check or a direct
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deposit, again, i'm looking -- trying to help personally so i can, you know, better work with you and your agency, you know, what is a common issue that comes to the broad issue of internal controls and how do we ratchet up our controls to address whatever is most common. and knowing as you well stated that the criminals are always going to try to stay -- whatever we do they'll try to get a step ahead of whatever we did. if we could have that information about the debit card refunds that are identified, that they were asking for refunds and you caught them. but they were looking to get it on a debit card. and gain, the belief that that maybe is easier to get away with it versus if they know they got to go to a bank andave some kind of contact with a bank to get that fraudulent refund from that bank. with that, mr. towns, do you have any other questions?
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i'm going to thank you for your testimony. conclude by saying, you know, while i think as you've referenced and in a written testimony and we're about to hear from o other witnesses, we do have a lot of progress to make, work to do. i also want to recognize the progress you have made and the commitment that you -- your understanding of this is a growing problem isn't because we asked for this hearing. it's because you're seeing the data as we're looking at it and are out there, you know, trying to lead the effort forward in a positive way. and for those hard-working employees, we're grateful for them and hopefully those who haven't provided that level of service you clearly want to be proved that, you know, they'll learn from their mistakes and do a lot better in the future with the american public that they interact with. so i thank you again for your testimony.
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i look forward to continuing to working with you and your staff and our thanks for being flexible here today with the schedule. >> thank you. and if you wouldn't mind, since i was up here at 12:00, and i hoped to be here when the other witnesses spoke, i'm going to have to step out but my team is going to stay to follow out. >> and we shared -- >> you do all have my apologies again with having a frustrating experience with the irs. >> and, you know, we appreciate your understanding of their testimony from the written and as we discussedyesterday, you know, at pretty good detail the subject -- the msage of their testimony and your staff's willingness to stay with us is also appreciated. thank you, commissioner. and we'll take about a 2-minute recess while we get the next panel situated. and then begin.
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[inaudible conversations] >> we will continue with our second panel. and we are honored to have for individuals with us. first, mr. jim white director of strategic issues at the government accountability office. we appreciate not just her presence here today but you and your colleagues at gao, the important work you do for all of our nation, but especially for congress and the resources that you bring to are working on the the hill. as well as three citizens witnesses. unfortunately, who have been
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victims of identity theft as it relates to the tax filings. we have first, sharon hawa, is that correct? from the bronx. we have lori petraco from york, pennsylvania, and ms. lavonda thompson also of new york. will also grateful of you being here. and as i said a number of times now, you have been very flexible with us and very patient as we try to figure out meeting schedule around floor schedule and full committee. so we are grateful for the. if i could ask all four of you to stand, and again so i can swear you income if you would raise your right hand. do you solemnly swear or affirm that the testimony you're about to give to this committee will be the truth the whole truth and nothing but the truth? and the clerk will reflect that all four witnesses affirmed the of. and we are going to set the
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clock at five minutes but if you need a little more time, we want you to be able to give your testimony as you see fit. and we are glad to hear. so mr. white we will start with you. >> chairman platts, ranking member towns, i thank you for inviting me. if you hear from the victims, id related tax fraud is a hideous crime. to begin i want to describe hypothetical and simplified example of refund fraud which is illustrate on page three of my statement. i think up on the screen. first, thieves steal the taxpayers identity. this happens outside of irs. second, if he files a tax return come -- claiming the name and social security number of the taxpayer. after verifying that the name and social security number match, and this again may be simplified, then irs issued a refund to the thief. later the legitimate taxpayer files a return, at that time
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diarist discovers two returns that has been found using the same name and social security number. irs holds up any refund while it notifies the taxpayer of a problem. and investigate. the notification from a irs may be one that taxpayer first learned his or her identity has been stolen. employment fraud is different, also illustrated on the screen. with employment fraud a thief uses a stolen name and social security number to get a job. the following year when taxes are due the employer reports the income to irs on which statement and innocent taxpayer files a tax return. irs matches the to and discovers income report in the end of the innocent taxpayer that was not included on the taxpayers return. irs sent a notice of underreported income to the taxpayer and that's when the taxpayer and irs may 1 learned about the id theft. so to summarize so far, irs learns about and identity theft affecting taxpayers long after
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the theft occurs. and available evidence she just a problem is growing. now want to outline what irs is doing to resolve taxpayers idf problems. starting in 2004 in the commission summarized some of us, irs create an id theft strategy set up an office to oversee it, but theft indicators on victim's accounts, screamed some returns for fraud and set the identity protection specialized unit and an id theft hotline. in 2009 we recommend iris develop measures and data for assessing effectiveness of viruses effort. irs agreed and has since taken new actions to help resolve innocent taxpayer's problems, this identity theft makes it appear to either claims to refund for underreported their wage income. irs is placing a temporary id theft indicator on account while still investigating. the purpose is to alert all irs
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offices that id theft may be the explanation, what appears to be. to detect id theft related tax on irs screens returns filed in the name of past victims. the screens are not perfect. is for example, iris greens are returned with a change of address it was love refunds with some legitimate taxpayers who moved. if it's greens too loosely, more fraudulent returns get through. this year about 200,000 returns failed the screens, 146,000 more fraudulent, 50,000 more innocent. also irs is expanding with screens for the social security numbers of deceased taxpayers to try to prevent thieves from filing using those identities. another new step give victims special pin number to irs screens at returns, and less the p.i.n. is attached. irs is ability to address identity theft and constrained by law, timing and resources. the laws governing the privacy
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of taxpayer data limits to some extent as the commission also describe, irs facility to disclose information about id thieves, federal, state, or local law enforcement agencies unless certain conditions are met. complicating any investigation is the fact irs typically discovered the id theft long after it occurs. finally, criminal investigations require resources. last year irs initiated about 4700 criminal investigations of all types including id theft, tax evasion, money laundering and other financial crimes, far fewer than the number of id theft cases. given all of this, can irs do more? options exist but they come with traders. irs screens tax returns filed in the names of known identity theft victims more tightly, but that will increase the number of false-positive and delay refunds to those taxpayers. it could also burden employers to be contacted about reported
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wages. looking forward, irs needs to continue assessing its efforts such as pens and screens for deceased taxpayers to learn what is effective. we have not assessed the effectiveness of these steps. in the long-term irs should be looking at how to take more advanced of new processing system that it is building with better processing irs might someday be able to match tax returns to wage statement before refunds are issued, and thus prevent more refund fraud. however, much prefunded matching would require employers to file wage statement earlier in the year. mr. chairman, that completes my statement and i would be happy to take question. >> thank you mr. white. ms. hawa. >> good afternoon, chairman platts and ranking member towns. thank you for allowing the opportunity to provide you with my testimony regarding this atrocious and rapidly increasing identity theft crime. it not only impacts individual livelihoods but it also steals
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minds of those on the osh treasury year after year and will continue to do so until something is done to prevent it. this unfortunate situation has taken a turn is an emotional toll on me. the stress, fear and anxiety are all compounded by having to deal with terribly organized agencies such as the irs and the taxpayer advocate service which only adds feeling victimized by the inefficient systems and lack of communication. knowing that i and other legitimate taxpayers like me remain foldable, taxis and after taxis and, lease me both infuriated and it also frustrates me. in three years these manages to my tax refund twice by filing fraudulent tax returns in mining. the first time was in 2009 after i found to my local tax preparation offices i had for the previous five years. two days later i received word that the irs rejected my return because my social security number was used more than once. scared and and shot i took measures to secure all my personal assets, credit reports
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and accounts. i attended police report, filed with the federal trade commission and mailed in hard copies of my returns to various irs addresses as instructed by different units within the irs. after 12 months of back and forth confusion, the irs is identity protection specialized unit assigning to an incredibly rude and hard to reach taxpayer advocate where i had to explain my situation, resubmit the documents, improve my obscenity all over again. it took a painstaking 14 months until i finally received my $6604 refund. refund. meanwhile, i to take on a second job to support myself and spend a lot of time, money and energy drafting letters and sending in the necessary information. in 2010 i was unaffected by still remained extremely anxious. when i finally received both my 2009 and 2010 tax refund a few weeks apart, i hope the worst was over. but this year i learned i fallen victim again and this time they also stole my state refund, together totaling $6335.
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researchers show me how antiquated the taxpayer system is. i realized the irs has been dealing with this crime since nearly the start of the millennium. so why do these things go in expense and incompetent in handling the matter and why has anything been done yet to combat it? the very process designed to accommodate taxpayers it has also become a windfall for these. there's been increasing tax that as result of e-filing and direct deposit which do not necessitate validating person lays identity went on to a digital signature to e-file senator carson a self selector is less identification number which is the taxpayers number from the previous year to turn the information that is easily obtainable. furthermore, a direct deposit on across the banks running number in order to release the fund. no further vetting of personal information or identity is required. so on two separate occasions identity thieves be filed early in the taxis and if i physically receive my w-2 form and use direct deposit accounts to steal
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my refund. to make matters worse in 2009, they receive $1895 more than i was due and i received a notice from the irs stating that i owed that amount in overpayment. electronic filing was created to deceive the irs most of dollars. versus a paper return was cost $3.29. but i urge instead to look at the many millions of dollars fraudulently paid out to these criminals. cases jumped 640% from 2004-2007 and an additional 300% since last year and many most of taxpayer dollars are needlessly and disgustingly wasted due to the broken and expose system. in and what technology is still prevalent when the topic priority would be placed on this issue. it is absurd that the government pays out twice on a single stone refund come a multiplied by hundreds of thousands still of stone refund if you. since the country faced with the worst economic situations in its history, this appalling travesty
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needs immediate attention and repair. this entire ordeal is a large part to the unacceptable lack of sacred measures that the irs and u.s. government have placed on the personal identity of taxpayer. and as an outstanding citizen of this country i demand change. i demand first that legislation be enacted to force federal estate tax offices to put appropriate measures in place that prevent thieves from taking the people's hard earned refunds away from them, and forcing them to fight for the identity of a tax refund for the rest of their lives. i second demand that federal government work more closely with state and local law-enforcement agencies to target and catch the criminals so that victims like me can rest their note that these criminals are serving time. and i 30 minute each day develop and enact the necessary laws to protect consumers from corporate tax preparation offices that have little incentives and safeguarding their customers personal information. i hope that by getting a testament to take measures will be put in place that will no longer have to deal with this nightmare into law. i thank you for your time and effort in making these critical changes happen now.
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>> thank you, ms. hawa. ms. petraco. >> good afternoon. my story begins on march 15, 2011 come when i retrieve my mail from my mailbox. i received an envelope from the internal revenue service. inside was a window envelopes that by the postal service returned to sender attempted not known unable to forward. inside the window envelope was an irs change of address form, and more poorly a notice cb 12 for tax year 2010, dated february 14, 2011. my social security number, my first and last name which are all accurate but an address of wardy five, apartment three b., yonkers, new york, 10705. i had never lived at this address, let alone ever lived in yonkers or the state of new york.
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the form state i had a miscalculation on my 2010 form 1040ez in the area of tax credits and that my new refund amount would be $4552. i read this formed several times in his belief, and called my husband. i nearby joint tax return was prepared by an accountant, that we as a 1040 long form simply two children in college, and finally that we just been a return within the last two weeks. i wanted to believe an error was made that would explain this. i.v. immediately called the irs 1-800 number, but after 20 minutes on hold without being able to speak to anyone, i gave up. the local irs office is about one mile from my home that they were closed for the day, and so i spent a restless night wondering what this all means. march 16 i arrived at our local irs office early and was asked to step up to the counter. the clerk was courteous, but the cabinet is in no way private.
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everyone sitting in the shares directly behind me could hear our conversation and the lobby was full. when i should the clerk what i had received and that this wasn't my return, she blurted out, your identity has been stolen, i will need to fill out and identity theft affidavit. the entire waiting room heard this. until then i was hoping that this was just a mix of. she asked for my name and for me to recite my social security number. just seconds ago, this irs employee proclaimed that i had been a victim of identity theft, and was not asking the to recite, where others could hear, the same sensitive information she concluded had been stolen. i said no comment that she could take information from the form in front of her, and i would be happy to show her my driver's license. she asked, when did you lose your social security card? i replied, i didn't. she wanted to see it, but i
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don't carry it in my wallet because i don't want my identity stolen. she completed affidavit until they to come back with my social security card so that she could send the license associates agree number with the affidavit. she also told me because this person found the return as a single person and got $4552 already, my legitimate return would be held up and i would not see my refund until perhaps october or november, roughly eight or nine months later. i asked her, how can a person file a return and without validation or proof of anything receiving refund? she replied, do you know how may people file electronically? we expedite the return and match up the information later. finally, she said, don't forget to file a report with the federal trade commission, the social security administration, and the three credit bureaus. again, the clerk was courteous to her matter-of-fact manner and
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abruptness, that this happens all the time, in front of a roomful of strangers, was upsetting. i went out to my car and cried. i was very overwhelmed. i was so upset that i begin to wonder how far the seafood company. i i went home, signed onto all three credit bureaus on the internet and reported the identity theft and printed my current reports. everything was okay. i pulled out my bank accounts to see if my balances were okay. they were. i was late for work that day in order to protect all that i have worked hard for. i felt the need to report this to my supervisor as well as to the chief, as i work in law enforcement and did not want someone to jeopardize my job or my good name. that eating about a report with the federal trade commission, and they requested that i file a police report with my local municipality. i am not sure why because this is cybercrime involving someone in yonkers, new york, and not
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york, pennsylvania. march 17 i contacted springettsbury township police department as though to detective raymond craul, and explained what had happened and what the federal trade commission requested. he was somebody with federal trade commission's request and gave me an incident report number, but stated he had no jurisdiction to investigate. i added the police department incident report number to the federal trade commission's website on my incident page. i again had to leave work early to go out to the social security office in york, pennsylvania, to inform them of the identity theft. unfortunately, at that time they still didn't have my 2010 earnings to verify for accuracy. i was resigned to the fact that this nightmare would continue indefinitely. at the irs would hang onto my tax refund, and that i would have to be vigilant with a credit bureaus for the rest of my life. on april 27, i discovered i was not the only local government employee in york county affected
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by the identity theft via the irs. one of these victims suggested to our local congressman, todd platts, and his office could do. i follow through with contacting the york office in filling out the constituent service form with all related documentation. on april 28, i told my story to two special agents from the department from the department of the treasury out of philadelphia who are also launching an investigation. i in here today to tell you that i'm a victim of identity theft. i am forever changed. i will always need to check on my credit and be vigilant in what information is shared with others. i am a victim, being victimized by the irs it was only at my refund because they don't have checks and balances in place to prevent crimes like this from happening, to timely verify personal and financial information, or to time and adequately assess people like me who have fallen victim to identity theft.
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if they did, they would have seen the following things. that i filed my taxes with the same man as married filing jointly for the last 28 years, that i've lived at the same location for the last 12 years and never found any change of address with any other governmental agency, meaning social security or the postal service. and finally, that we always complete the 1040 long form an that we always filed by mail and not by using the internet. i thank you for the opportunity to tell my story in the hope that changes occur within the irs that would prevent this from happening to others. hopefully, my tax refund will not be delayed until october or november so that this law abiding citizen can get back to living her life. thank you. >> thank you, ms. petraco. ms. thompson? >> good afternoon. my nightmare began on monday,
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forever 28th, 2011. that day my account was in the process of e-filing my federal tax return. he received a message from a software provider alerting him that a tax return had already been filed for me. he responded by devising that it could not be filed already because he was trying to file it now. he then called the irs and they in fact confirm that a return have been filed in my name. my accountant called me and told me what had happened. he gave me the number to the irs to call and find out what the person used to file the return because they could not release that information to him. i called and was told they could not tell me anything. once i get home from work, i called the irs again and spoke with mr. baird. he told me what i had to do as far as five and identity theft affidavit with copies of my drivers license and social security card. calling the federal trade commission, filing a police report, contacting the credit bureau and social sturdy office.
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once i finish speaking with him, i call the federal trade commission and spoke with an employee whose name was mark. he took a complaint and gave me a confirmation -- a confirmation number. i called social security and was informed that had called the federal trade commission and i informed the representative that i just talked to someone. she said okay and wished me good luck. that day she said that i was the fifth person that should spoken with who had their identity stolen. on february 28, 2011, i found an incident report with the york county, pennsylvania, district attorney's office. on march 1, 2011, i followed a police report with york city police department. a detective found out who did it but he could not charge the person because that person is reportedly located in the state of new jersey. he was told the irs would bring charges against them. on march 15, 2011, i forwarded a
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letter to the irs with the following document. identity theft affidavit form 14039, prepare explanation for not filing electronically form 8948, incident investigation information, copies of my social security card and pennsylvania drivers license. on march 16, 2011, at approximately 10:25 a.m., i call to get some information on my case because they would not release it to the detective, and he wanted me to call and get it. i spoke with the most rude and discourteous person i've ever spoken with in my life. when i asked her about my case she proceeded to yell and scream at me. when i asked for her name and id number again, because she said it so fast when she answered the telephone, the phone went silent. she had hung up the telephone. i then called the detective and told him what happened.
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he told me to calm down and call back and hopefully i'll get another person. at 10:30 a.m. i called back and mrs. bennett answered. i could not stop crying and told her what it just happened to me when i had called a few moments earlier here mrs. bennett kept apologizing for the previous person, which she is not required to do so. she informed me that the person used my social security number, first and last name, no middle initial, he filed that return. once my return was received, the irs considered it to be a duplicate return. on march 18, 2011, i voted there to the irs about the situation on march 16, 2011, and i did not get a response. our telephone calls monitored by the irs for the purpose for hearing what is being said? is this unhelpful attitude toward the public a single incident or is it a general attitude?
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on march 30, 2011, at 11:10 a.m., i called again to get an update and spoke with mrs. dandridge. she informed me that it would take 16 weeks to six months for me to receive my return because of the identity theft. i thanked her for her help. i had to close my checking and savings account and get a new one and order new checks because of this. and added expense albeit a minor one, but one which i did not need. i had to bow my credit reports and luckily, so far, there has not been any activity on the part of the teeth. i had to put a 90 day alert on my social security number. on may 10, 2011, i bought a letter to experience, to put a permanent alert on my social security number. on may 17, 2011, i wrote letters to trans union and equifax requesting the same. you may not be able to know how
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stressful this has been. i can't sleep. i wonder what the person will do next as far as a study of credit card or anything in my name. now that this has happened i've told the irs will monitor my social security number for the next three years. when i found my return, it will take them longer to process it because of this. what, if anything can't is a diary doing to rectify that this does not happen again to me or another person? in my work history, i've had the occasion to see and work with victims of crime. i have seen to call me an encouraging effect a policeman, a prosecutor, or others involved in the criminal justice system have had on victims of crime. the system i work with make every effort to avoid victimizing the victim a second time. the way i feel i've been treated by the irs system has made me the victim a second time. i ask and wonder how many people
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have had the same unpleasant experience. thank you. lastly on to stay may 31, 2011, i received correspondence from the irs dated may 13, 2011, regarding another individual high a tax return using my social security number. this incident started february 28, 2011, and i'm just now receiving correspondence. why would it have taken -- why would it take three months for me to receive this information? thank you for your attention. >> thank you, ms. thompson. and again, my thanks to all for other witnesses, and to our three citizen witnesses, victims of identity theft, i want to add my words of apology to the commissioners, on behalf of not specifically the irs but on behalf of our federal government for how each of you have been
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treated as law-abiding citizens seeking to comply with their obligations as taxpayers, and instead becoming victims, not just of criminal conduct, those who sought to defraud you, but also victims of poor service from us, the federal government. and all of us bear responsibility for that ultimately, especially as elected representative of two of you, and, i know for our third witness, you know, on behalf of all of my colleagues, we want to do better on your behalf. i want to kind of focus a couple of questions, with you three come in mr. white separately. and maybe, mr. white, actually ask you first. minute year -- my notes here.
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i apologize. here we go. in the commissioners testimony, and also in your written testimony and your assessment here today, mr. white, you talked about the screening process. and i'm not sure what, if any, detailed gao's review that as far as how the filter process works, and whether you're able to make any assessment of kind of relates to my questions earlier to where we have these three witnesses or others, where it was, while worth certainly the 140,000 or so, clearly others slipped through that seem to have a fair number of red flags they get caught up in an usher if you give an opinion on
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how to assess that process. >> we have an assessed it ourselves. i can say several things though. one, the filter process does not work perfectly as we have heard. and it does stop some fraudulent returns, some fraudulent refunds from going out the door at irs. however, they are both false positives and false negatives. so far in 2011 there's been about 50,000 false positives. those returns of honest taxpayers that got stopped by the filters, by mistake. so that great a burden on those taxpayers. and then on the other side you false negatives where fraudulent returns slipped through the filters, perhaps because the id theft still so much of the honest taxpayers identity that they can get through the filters. they had enough information to get through. so you both kinds of problems. the filters don't work perfectly. we've recommended that what irs needs to be doing and they've agreed with a recommendation and
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started doing this, they need to be assessing every unit the effectiveness of the actions they're taking. they've taken a number of steps. they're taking a number of new steps this year. each year they need to be assessing those steps and then feeding back. the need to be a feedback. whether they learn from what they've done and correct and adjust the properly. part of the problem here is these are adjusting as well. so it needs a continuous problem by irs. they have started that. >> and in essence what i would call annually auditing internal control system to prevent this type of fraud from occurring? >> yes, to learn what's working, what's not working, do more of what is working, pin numbers, for example, turn out to work well in the spirit then that would be something to think about expanding obviously. >> on a specific, i know they're looking at the results of that. is that anything that gao, that you are engaged with the irs in
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assessing that that pilot program? >> no, we are not. our sins though based on the work we did in 2009 is that p.i.n. seems to be a promising approach. it depends on taxpayers using it for it to work, but it ought to be an addition. it seems like it has the potential to be in addition to the filter system that would make that system work more effectively than it does right now. >> okay. >> the profit is if an id theft is stolen, a lot of the taxpayers identity, more than just the name of social security number, they can make a return to look realistic prevent have a copy of last year's tax return. so they can get through the filters. that p.i.n. is a number that only the honest taxpayer would have, unless the thief is hacking into the home computer, for example. there is no perfect solution here, but that's a solution that seems have a lot of potential. >> and from what i've come to
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learn, seems to be the more we can expand that effort, if the data plays out, it seems like it may, that that would be one way to really try to crack down and prevent this fraud from occurring. >> than i do think there are some long-term solutions. these are years away, but for example, right now irs does not match tax returns to the wage statements, the wt use that employers filed out until months after the filing season ends. the first match is done in june. part of the reason for that is employers don't have to send those information returned to irs until either the end of february, the end of march. and irs matches later so the refunds go out the door first and that kind of matching is done afterward. if irs can modernize their processing system, and if the due date for those employer wage statements could be moved earlier in the year, irs could do matching before refunds go out and catch more refund fraud.
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but this is something that is years away. they are working on their processing systems but they are not ready right now. >> and as part of my conversation with commissioner in his april speech, referenced that for looking ahead and try to again be proactive in the long-term. i didn't get the chance to ask him that question because the fact that we are providing w-2s by the end of january, once that employer makes that available to the employee it would seem why wait another month or more before having it also shared. so that alone would hopefully allow us to move it up just that one change, you know, the earlier the better. >> we have worked on going for the ways and means committee. we are working, looking at this trying to see if there are some options to move that up. >> great. before i go to our other witnesses i'm going to yield to
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the gentleman, mr. tasker for the purpose of questions and then i'll come back with other questions. >> thank you, mr. chairman. and also let me to the witnesses, really apologize our regret that happen. we are happy are able to take the time to come in and share with us in terms of what occurred. i really appreciate that. ms. petraco, as i understand it you discovered that your identity was compromised after receiving an address change request? >> yes. >> okay. was the identity thief attempting to change your pennsylvania address to a yonkers address? could you explain that? >> the letter i received had a change of address. the envelope and i went to
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yonkers and was rejected went back to the irs. the irs put it in another envelope and and wrote my name and address, i guess they got from their files, and then that envelope came to me at my legitimate address in your pennsylvania. so when i opened it up i saw this yonkers, new york, address and i knew something was wrong. >> right. had there been any other attempts to use your informati information? >> no. to the best of my knowledge this is the first. >> no credit cards or anything like that happen use? >> no. >> it appears that your id was simply used to just commit tax fund fraud, that's what it was used for? >> correct speculating about the status of the investigation being conducted by the treasury department? >> no. since i painted irs office i have heard nothing.
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except through office -- mr. popps office. >> but otherwise you have not been -- they have not been touched with you? >> no. >> ms. hawa, is that it? thank you. has your id or any other to victims been used for purpose other than tax refund fraud? did they use anything else the? >> not to my knowledge. >> how long did it take you to get assigned an agent while you're waiting for 16 months of? >> the first year i was dealing with various agents within the irs for about 12 months. and then after 12 months they assigned me to a national, a taxpayer advocate service agent. who continued their quest -- the request to get my refund suspected you get your refund? >> it took 14 months but they
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sure know i was just contacting us going to get it within 10 days. >> okay. >> and this year i did not get a signed an agent all. >> do you have any indication that action is being taken by the irs to find and prosecute the person? >> it's very difficult to get information about the fraudulent claim, just getting information about how much the refund was for when it was issued, is not something that they freely share. and that is after they identified that you are a legitimate taxpayer. so no, aside from just the basic information which i had to plead for come i have no idea what the status is on the criminal investigation. >> that he has to also, have you, you any idea where your identity was stolen in terms of what happened and how they're able to ascertain it? i'll ask all three of you that.
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>> for me in 2009 it started when i went to a local tax-preparation office in my neighborhood. i've been going to this tax-preparation office for five years. and i realize that it was a tax-preparation office went 20 additional customers of this offers came forward and said the same thing happen to them. >> i have no idea. to the best of my knowledge, i thought everything was cured. >> ms. thompson? >> no, i have no idea. >> let me just go with u2, mr. white. you talked about the appropriate procedures should be put in place come and you also talk about modernizing the system. that costs money, doesn't it? >> irs spends a lot of money modernizing their systems today. they have made progress. we've been reporting this for a long time now.
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and after congress passed the irs restructuring act in 1998, irs got much better in managing systems modernization. it is still not where it needs to be to do the sort of pre-refund matching we are talking about. there -- they are probably years away from that right now. >> i'm concerned about this money. everybody is concerned about, i'm just thinking that sometimes we sort of react to things when we should spend and we would save. we ended up not spending and it would end up costing us more. it happens that i think we do that a lot, especially in government. so, i'm just concerned about that. i think the episode of make the appointment because i really do this is very, very serious, if a person is waiting for his or her money and is stolen, and they're sitting waiting, that's very frustrating.
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>> i agree. irs as you may know has a separate appropriations account for systems modernization, and under the law, gao looks at that account before they can spend money out of it. the balancing act is always been making sure the irs has management capacity and the controls in place to be able to spend that money smartly so that they didn't get more money than they could spend effectively, but enough so that they continue to make progress modernizing. >> let me just tell you what my real concern here is, and aside from the fact that a person has lost -- i'm thinking credit scores, employment or other things, all the negative things that can happen, you could be impacted by this. i mean, and may i ask you, how about your credit score? have you dealt with this?
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>> well, i'm cautious to begin with, even though prior to this incident happened the first year. i always kept up on my credit reporting agencies and i always had freezes on my accounts. so this just exacerbated my need to continue the freezes and always be on top of my accounts that this is going to be a lifelong issued to do with. even if my taxes are not so next year, i'm still going to be concerned that my identity is compromised and i'll have to worry about accounts being opened in my name and whatnot. so this is not just a one time thing that we have to do with. this is a lifetime issue. >> ms. petraco? >> i agree. i don't see this ending for me anytime soon. currently, it's just the irs but i will be vigilant about the credit scores. because, you know, i work in law
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enforcement so that the impact for me is just, you know, the fact i am a law-abiding citizen. i'm supposed to be protecting others in my roll. so it does have an impact, you know, because i don't know what way this person is going to use my identity. and my name is unique, so you know, that limits the amount of people that have that name out there. so it is me. >> ms. thompson, there's been a proxy three months since you discovered that your identity was used to commit tax fraud. you also reported a problem to the irs and the ftc, is that correct? >> yes. >> have you received any written key mutations from either of those agencies?
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>> federal trade commission wrote me a letter. i have my confirmation number on it. irs connecticut any income except lead i just got the other day. >> what did that say to you? >> that individual use my social security number to file a return, but those three months ago. they're telling me what to do as far as the affidavit and contacting federal trade commission. but i already did all that so it is three months late. >> right. did you contact the your td? >> yes. >> what was their response be? they have a police report and so does the district attorney's office. >> do they appear to be investigating with you, we do no? >> the new york city police department found an address and a name in new jersey, but the irs when they came to talk to the other month, he said he can't arrest or. they are going to arrest or. he said he can't touch or.
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>> when you say day, do you mean -- >> the irs. >> have you received either written or verbal communication from the irs which gives up, easier an update on the progress of tax fraud? >> no. >> just that letter and that's it. now, mr. chairman, i think that's a real issue in terms of the amount that is involved it because if the person discovers that if this 3000, $5000 nothing is going to happen, the irs is not going to pursue it and nobody, you know, why not do it again next year? that might be the way he make a living from this point on. until something is done about. so i think we need to look at the possible legislation that would encourage local law
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enforcement to also get involved in terms of even if it is $1000, 500 it doesn't matter that it's not theirs. and i think that until he come up with something of that nature, i think that this is going to continue. and i must say that we need to do everything we can to make sense that this does not continue. and i think in my particular legislation, i yield back. >> i thank the gentleman, and share the gentleman from new york's interest in pursuing this further, specifically on the prosecution standpoint. as with a conversation with the commissioner, and with the gao, what, if any, current statutes prohibit the sharing of information from the irs with local law enforcement you know, the state department -- they partner with justice but as a reference earlier, when the talk but a 3000-dollar case here,
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$4000, justice has limited resources as well, but our local law enforcement, you know, they're pretty efficient at dealing with these. so i think, if this is something i've conveyed to our citizens who are with us, that when this hearing ends, that will continue to work in a nonpartisan way with committee, with gf's -- gao, with a irs officials to see how to strengthen that ability. because i am one that believes exactly what you said that if we don't start sending a message, whether it's $1000 or $100,000, we're coming after you. if you steal money from the american taxpayers, and you victimize law abiding citizens, we are not going to just ignore them. we are going to go after it and try to hold you accountable. to look forward to doing that. using myself time now. -- yielding myself time now. i think the two or three victims
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here, one, a sincere thanks for you to tell your stories are so by being here you help raise public awareness of this issue. you personalize it, he's human i see. this isn't just about improper payments being made by federal government to criminals. this is one piece of a huge, huge pot of improper payments. official number most recent of $125 billion a year in proper payments being made. and what's going on here is one part of that. you know, millions and those of dollars going out in fraudulent tax refund. so you are helping to your story is very important. and in each of your statements you captured it in different ways from the need for us to work with the commissioner and his staff to strengthen the training of irs agents in how we assist victims of crime, which is what each of you are.
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and you stated it in different ways, but i think state it very well, and ms. petraco, i am here today you -- i hear today today i'm a victim of identity theft. i am forever change. ms. thompson quote, i betrayed by irs system has many a victim, a second time. ms. hawa, your statement they continue to treat me as if i am the one to blame, adding even more stress to the situation. that's not acceptable, and the commissioner acknowledged that. i appreciate the commissioner's colleagues staying to hear your stories. if you have had the chance i deputy commissioner tucker who is here with us, she was part of my meeting with commissioner shulman yesterday, understands the importance of us to do right by you and all victims of this type of criminal conduct. and i think it captures earlier
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by referenced each of you unfortunately dealt with irs agents who were not living up to the standard of assistance as you well reflected in your statements come in your testimony deputy commissioner tucker is a 27 year employee of the irs, dedicated to do right by you. her presence here today reflects that along with her colleagues. and i guess a couple of specific question, mr. towns testimony, once you have been told are what action you are aware of, on how the interaction with irs went, a couple of additional questions. ms. hawa, i want to make sure i understand one part of your written testament to what you shared here today. when you were -- find my spot again.
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you were contacted in october of 2009. and i believe in writing that you owed an amount of $1895 back to the irs? >> correct. >> and that amount was the difference between what you are lawfully supposed to get and the amount that the criminal had gotten fraudulent, correct? >> that's correct. >> by this time though you are already giving with representatives of the irs, to kind of go after this identity theft, correct? >> yes, but i did have one person i was dealing with. i would just talk to the identity protection specialist agent. every time i called it was a different agents i did not are consistent my profile showed that i was a victim. >> that kind of captures what the commission and i know what we talked about the training
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aspect, you know, that there's a breakdown in the training system that, not just in training but in the internal tracking system i guess is how i described, that you are already in the system working on identity theft, and i assume probably maybe seven or eight months into doing that, because this is the fault, yet the system kicked out hey, we overpaid you. well, they did overpay, but not you. overpaid the other person the full amount. and also, when you are dealing with not those in the identity protection, the specialized unit, but also i understand that two of the general agent you dealt with were not aware of that there was a specific unit to deal with victims of identity theft? >> that's correct. issue when it happened i had lost the number for the identity theft unit, so i call the general 800 number just thinking
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that they would transfer me over, and when asked, they have no idea what you i was even referring to. and they were giving me different instructions on how to deal with filing my paper return. addresses to send to and what i really needed to file. >> not understanding the scope of the issue. you are trying to deal with which was, because you enforcing have been through it before, you knew what was going on, trying to get to the bottom of it. >> writes back and i think -- will, i am grateful for your statement that those agents that don't typically deal with, that that's part of the review of how they get training. so when someone such as yourself calls them. one of the specific question to you, ms. hawa, am i correct in understanding after 2009, and you are supposed to be flagged, were you also given a p.i.n.
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number? are you supposed to be? >> i had requested a p.i.n. because i heard her moorings of people being issued out p.i.n. when this first happened to me. even a gentleman that had this happen, this happened to him earlier in -- he said he received a p.i.n. there are some sort of verification method so it didn't happen to him again. so i requested that immediately, and they told me that they're going to look into it and i never received it. and in 2010 i was not impacted at all. so i thought that the worst was over but it wasn't going to violate the irs for a pin number. this year but i found out what happened to me all of the game i call the irs to see why my profile wasn't flat, as they promise, they didn't know why. they had no explanation stack so it was back in '09 where you were told it would be flagged, you asked for a p.i.n., that didn't happen but you thought you still flagged.
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then in 11 something, you know, that didn't work. >> that's correct. >> and that kind of comes to discussions with commissioner, with mr. white, that hopefully that if we are able to expand that p.i.n. process, that they will be more exact and the three giving examples, next year you have to have a personal identification number, you know, and it's not a question of keeping flag but they only you can file and be able. with one caveat. mr. white hit it, depending on how you receive that if those electronically, personal e-mail versus mail or even mail, that that p.i.n. isn't stolen, you know, in some fashion. but certainly would be another hurdle to guard against it. i think i had one or two other
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ones. i appreciate everyone's patience here. and this kind of, ms. thompson, mr. towns i think pretty well covered this. when you are dealing with the york city detective, new york city police department's detective, understanding because this person identified as being the criminal here was a new jersey, they weren't going to be presenting it, irs would. were you told over the phone by the irs that they would be pursuing it, or were you told by the detective that his understanding from the irs? >> when the to irs agents came a couple months ago to talk to us, they had told the detective that he could not arrest her, that the irs would. >> okay. so and i was kind of what we engage from a casework standpoint, they came out to look into from the philadelphia
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office of? >> yes. >> but you're not received any feedback from that? >> nothing at all. >> the and let me look you a second. a final question, ms. petraco. when you in the york office and understandably, you are trying to figure out what's going on here, and then already being a little concerned and then being told that you are a victim of identity theft and the engagement that happen in a public setting, just i guess in general, did the agent that you are dealing with understand, get it when he didn't want to say the information publicly with other people sitting there listening? was there just, you know, an understanding, sorry about that, or was it just more they did
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realize what they were doing? >> i think my tone of voice when i said no, you know, no. get information off before. she. she said okay, okay. so, you know, i just don't think she really thought about what she was saying, or you know, just didn't put it all together. >> marchers name, social security number and not taking, you know, you know, thinking i've got -- because i ask that because again, it's an issue of training of the sensitivity of this information that we're always on guard. i'm like each of you, you describe your own approaches. my wife thinks, you know, i have a shredder at home to anything as any kind of identifying goes into the shredder. for years i have been trying to be very productive because of
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this very concerned. and it sounds like each of you have tried to do that. and, unfortunately, it wasn't enough, not because of a lack of effort on your part. i don't have any other questions. mr. towns, do you? >> no, i don't. as i indicated though, i just think that a lot of things could sort of fall through the crack and not be dealt with. for instance, if the person is in another state and it's not a lot of money, that ticket very easily almost even ignored, because if you have to, seven and $50, so, therefore, why would you spend 15,000 to collect the 750? so sort of pass it along. and that's my concern. so i'm not sure that, we need to look at that because if they are saying that the person in your cannot make the arrest, and i'm
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not sure that the arrest is going to be made, then i think the fact that there's no to medication, to me is very troubling because the person, the victim should be informed as to what's really going on, and i think that's something that really needs to be looked at. also understand in terms of the irs, i mean, how much do you want to spend to collect 500,000 -- i mean $500, you know. so i think we have to look at this and i think we have a role to play here. and it's not just the blame game. ..
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>> longer term if there could be more refund checking. that takes the profit out of the crime. that to collect it.ight, irs it has to be prevented up front. >> but the person who is a victim -- >> yeah -- >> feels differently. i think that's the way they should feel. >> absolutely. that's why it is such an insidious crime. for the victims, it is a big deal. >> right. with that, i yield back, mr. chairman. >> thank you. i would wrap up the discussion where i started in kind of the
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three primary issues. if we do better up front on internal controls and even the filtering system. that's why in my questions and comments earlier. i think you went through in your testimony all of the things that we're -- have no changed in 28 years. the status, your address, you know, that filtering system itself, if it's a january turn, asking for a debit card refund, you know, and without any substantiating documents. that should be a big red flag. we get into those who maybe -- likely identity theft victims. the more we do up front reduces the number of fraud cases. when they do occur, there are fewer to pursue to throw the back at to go after mr.
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townsend's point. we're coming after you. if someone knows everything year get an extra 3-$5,000. do it once a year, produce the number so there's fewer to go after to hold accountable. and third is, in doing that, we do better with victims' assistance. i'm not a law enforcement professional, but my understanding is where there is criminal product -- criminal conduct and, you know, victims of crime, an important part of the healing process is the victim being kept fully informed all the way through that process of pursuing the criminal, the wrongdoing to know that ultimately it's not just a -- they were made whole as you are going to made whole. you are going to get your refunds. but that justice was served. and i think that's when we have, no matter what the dollar amount, that we are not pursuing them. justice isn't served that prevents that ultimate healing process for the victims.
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i think prevention, prosecution victims assistance, and, you know, i think by statements, the commissioner understands that and is committed to that not just today, but has been. you know, we need to partner with them and with the deputy commissioner and this committee and appropriations and make sure that we're -- we're well devoting the necessary timed effort and resources to this issue. so thanks again for our four witnesses here in this panel to our irs officials who are still here. commissioner shulman on the first panel, certainly helped raise great awareness of this issue and allow us as a committee to be more effective going forward to try to make sure that you three certainly are never again victimized in this way, as well as other americans are not victimized and we do right by you and the
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taxpayers in the dollars sent to the government. we will keep the hearing open for two weeks for additional information requested or that you want to submit to the committee to supplement the record. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]
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>> house republican leader had a meeting friday in libya. the measure did not call for removal of forces. it would require president obama's to outline the military's involvement in libya. under the resolution comment the president has congressional authorization. watch live house coverage here on c-span. the president will travel to toledo ohio to talk about the auto industry. we have live coverage. that is on c-span 3. >> it was not altogether a compliment. it is flattering. >> he change the power structure of the house. >> he was impugned as a tyrant.
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he overturned a longstanding custom in the house. it to be equal parliamentary footing. >> you can also download this and other podcasts online at c- >> submit the romney kicked off his bid for the psintl miti. is ihisendunorhe republican campaign. >> there are a lot of people out there that we above. we appreciate you coming here. i believe it is a very significant moment.
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i have known him a very long time. we started dating in high school. we have been married 42 years. in many of you know this story. we have five sons. i have seen them in a lot of situations. this is my diagnosis. i would not have made it and pulled through without him and his encouragement to keep me pushing. the sand happened when i was diagnosed with breast cancer. he encouraged me. he gave me the straight. i have seen him an untold situations. there is no one i would rather
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turn to when there is a crisis moment to please fix what is going on. right now american is broken. america needs a turnaround. they have the confidence and experience to do that. that is why i have all the confidence in the world that he will be the next nominee for the republican party. he will be the next president of the united states. this is really what new hampshire is all about.
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this is what america is about as well. thank you so much for opening your farm. how'd you opened this? i see a lot of friends here. many have retired. i saw some college students. couples are here with their children. you can see it from the front. i spoke to a single mom who is taking some time off from work. we will not tell anybody. my guess is then everybody here has a different story they can tell. we have different backgrounds. we wake up in the morning and go to different jobs. we go to different churches. at that some of the have families who have lived in new hampshire for 200 years or more.
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there are others that have come here more recently. ahoy the taxes are better over here. we come together to begin a process. we often take for granted one of the greatest achievement is. this is not the source of america's greatness. they answered to a free and independent people. this is one of the most powerful nations that has ever existed. they have the courage to stand. it is because of their vision the united states america is not
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a row by a mauna kea. -- is not ruled by a monarchies. we do not have a ruling class that inherits the power. there are no dynasties in america here it who is it that rose this great nation? you do. every four years you decide who it is that will give the state did the union address. he will set the course for the country. who will be the commander and chief. this has always been true in america. the each of us has chosen to walk in different past, we are united.
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we love america. we believe in america. today we are united not only by our faith and belief in america, we are also united in our concern for america. this country we love is in peril. that is one reason why we are here today. america did something that is quite imperative. we gave someone a chance to lead the country. this is someone who did not have a long record. the promise to leave this to a better place. we did know or can a president he would make. when barack obama came to office, we wished him well and hope for the best. now and the third year -- now in
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the third year, we have things to judge him by. he has failed america. when he took office, at the economy was in a recession. he made it worse. he made it last longer. three years later over 16 million americans are out of work. millions more are unemployed. unemployment is still above 80%. that is the number he set his stimulus to keep from happening. foreclosures still at record levels. three years later our national debt has grown. families are buried under higher prices for food and gasoline.
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it breaks my heart to see what is happening. this makes the president obama's on misery index. it has never been higher. what is his answer? he says i am just getting started. no, mr. president, you had your chance. we are the ones who are just getting started. [chairs] >i visited with a family who lie in a suburb of las vegas. big bear in their early 40's.
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now they have lost their homes. there are abandoned homes. they do it they can to make it to the end of the month. it does not matter if they are republican or democrats, and depended libertarian. they are just americans. across the greatest country on earth, there are millions of american families just like them. figure of believing that if they play by the rules and were tired they will have the chance to build a good life with steady work. -- and worked hard, they would have the chance to build a good life. in that america, made you do not wonder if your children will have a better life.
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you know they will. you know it the same way that we know the sun will rise in the east. it defines us as americans. generations of immigrants of the statue of liberty for the first time. they have a lot of questions. one thing they knew is that they were coming to replace her anything was possible. their children have a better life. i believe then that america. i believe that you believed and that america. it is an america of freedom and opportunity. innovation and hardware propel them. it is secured by the greatest military the world has ever seen.
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time of historic change. he is hesitant and uncertain. did -- hen't it hesitated to speak out for iran. he speaks with ernest -- firmness in clarity. he is treating israel the same way. it is a suspicion and distrust. to his credit, he ordered the raid that killed osama bin laden. in afghanistan, that was right.
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the president seems to take his inspiration not from the small towns of new hampshire but the capitals of europe. consider encouraging entrepreneurs, he raises their taxes. mounds and mounds of bureaucracy. he ran spare a disastrous national plan. his first answer to every problem is to take power from you and from your local governments and from your state so that his so-called experts can make decisions. with each of these decisions, we lose more of our freedom. you and i understand that. we book that our country.
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we know that things are right. they are not getting better. his european answers are not the solution to america's challenges. the american ideals of freedom and opportunity made an unapologetic defense. i intend to make it. i have lived it. [applause] 27 years ago, i love my job and went to join a small business. it had been a dream of mine to try to build one from the ground up. we started in a little office a few hours from here. we were able to grow to hundreds of employees. i became very deeply involved in helping other businesses.
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sometimes i was successful. other times i was not. i learned how america compete with other countries. i left this business in 1999 to help with the salt lake city olympics. when they were over, i came back to serve as governor. i never held public office before. i went at it like a brand businesses. i asked tough questions. they will get worse in the future if you do not. we had a nearly $3 billion budget gap. my legislature was over 85% democrat. the expectation was that we would have to raise taxes. i refuse. i ordered a review of all state spending.
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this sent a message that business as usual is over. they sold state property. i found the state was giving over $1 billion a way and free health care. it is the solution to the state problem.
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they were among the first of these days. i am proud of that record. all these experiences it helped shape siam. if i ran into a list of all my mistakes, she would find it hilarius. he would be here all night. i have learned from the successes and failures. turning around a crisis takes experience and bold action. for millions of americans, the
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economy is in crisis today unless we change course. [applause] did you know that government under president obama has grown to consume 40% of our economy? we are only inches away from ceasing to be an economy. i will finely balanced the budget. my generation, your generation will pass the torch and not a bill. i will insist that washington learned how to respect the constitution.
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we are going to return the authority to the states for dozens of government programs. that will begin with a complete repeal of obama care. from my first day in office, my number one job will be to see that america is number one in job creation. [applause] it you want to create jobs, it helps to actually have had a job. , maker of business taxes
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competitive. he is more than he cares about the union bosses. over the last year the years, i cannot tell you how may times i've heard it situation is hopeless. i've never been very good at listening to those people. i enjoy approving them wrong. he apprenticed as a carpenter. he was darn good at it. he learned how to take a hand full of nails and then sped him out -- spit them out with the pointy end forward. he sold aluminum paint along the way to pay for gas.
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there are a lot of reasons they could have given up. dad always believe in america. he could grow up and worked his way around a car company. for my dad, america was the land of opportunity. the circumstances are no barrier to achieving one's dreams. small businesses were encouraged and respected. a good worker could always find a good job. the spirit of pioneering propelled our living faster than any other nation on earth. i refuse to believe that america is just another place on the map with a flag. we stand for freedom.
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it made the nation a great and powerful leader. they have not lost their meaning. they never will. we know we can bring this country back. i am mitt romney. i believe in america. i am running for president. [applause] this is to of our grandchildren.
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there is joshua in the background. the family is all watching in children. you guys are the best. plessy will travel to the conference. other speakers include glenn beck and donald trump. live coverage gets under way at 7:00 eastern here on c-span. they will have live coverage during the day. >> earlier comments john boehner said that any debt limit increase must be met with
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spending decreases. house republicans met with president obama to discuss the federal budget. this weekly briefing is 10 minutes. >> it has not been much of a recovery. the american people are still struggling. there are high energy and food prices. jobs continue to be scarce. they failed to materialize. the economy is not preaching in the private sector jobs. washington continues to be a big reason why. this continues to be the focus of our majority. we put forward a plan that build on our place for america. we ask them to take a look at
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it. this recognizes that regulating is the way to prosperity. it has not worked. i released a statement. it will send a message to our job creators that we are not serious about stopping the spending addiction. the american people will not stand for it. this is something you have heard me say since the obama administration first raised this issue. we also passed a budget to back up to this position. we can pay down the debt without raising taxes. we have a plan that eliminates
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our budget deficit and pays off our debt over time. it is no surprise that yesterday are members continue to press the case for the president. where is your plan? it is pretty clear to us that the markets will act for us. the meeting was about washington's failure to tackle our massive debt and not of the debt limit. i am ready. our members already. i think the country is ready. the time to act is now. if the white house is truly committed, it'll put a row plan on the table so we can get this done. i think they are doing a great
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job representing us. i have been productive. we have not seen enough progress and the white house. they want to get this done. it is time for them to step up the plate and get serious. i think we have demonstrated that we are ready to deal with the big challenges that face our country. i hope the president will join us sen. >> you are talking about libya. are you concerned that this resolution would have passed that he put it on the original plan? was their concern that you are mindful of what is going on and that is why there is consideration of the charger resolution? >> we will talk about libya. we will see what our members have to say.
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i suspect this issue will be resolved tomorrow. >> what resolutions are there? he was going to survive when it is all said and done? france we will have a conversation with our members today. >> what you make of this controversy involving twitter and congressman boehner? if you have concerns -- do you have concerns it? >> you have to talk to congressmen of wiener -- congressman wiener. >> romney is about to announce his bid for it this. his bid for it this.


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