IRS May Share Information with Authorities

Tax fraud prompts increased interest in cooperation

Wednesday, April 04, 2012
IRS May Share Information with AuthoritiesIn the last several years, it seems instances of tax fraud have risen significantly, and now the problem is becoming so widespread that the Internal Revenue Service is now looking at ways to increase cooperation with law enforcement officials.

Current federal laws make it quite difficult for the IRS to share information on any taxpayer with another body legally, according to a report from Forbes. In many cases, disclosure of taxpayer information is authorized only in response to requests from federal agencies for use in criminal investigations.

But because tax identity theft has become so rampant all over the country - the IRS says it had already stopped some 215,000 bogus claims worth $1.15 billion as of March 9 through filters it set up to flag potential fraud - there are now efforts to look for ways around current laws, the report said. U.S. Senator Bill Nelson, a Democrat from Florida, where this type of fraud has been particularly rampant, recently proposed legislation that would share taxpayer information between the IRS and local law enforcement agencies. The bill, named the Identity Theft and Tax Fraud Prevention Act, is designed to limit the ways in which crooks could claim other people's returns with a bit of personal information.

However, some believe this may pose a privacy concern and are therefore advocating more practical ways that tax fraud as it is currently constituted can be stamped out, the report said. For example, the National Taxpayer Advocate believes in a slippery slope argument: that once law enforcement has access to this document, who else might be able to receive it in the future?

"[I]f we place a greater value on protecting taxpayers against identity theft and the Treasury against fraudulent refund claims, we may need to make a substantial shift in the way the IRS does business," said Nina Olson of the NTA, according to the news site. "Specifically, we may need to ask all taxpayers to wait longer to receive their tax refunds, or we may need to increase IRS staffing significantly."

Eduard Goodman, chief privacy officer for CyberScout, maintains a blog about the ways consumers can better protect their information and the legal issues they may encounter when hit with tax fraud.

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