I’m here today with Rich Weber, chief of the IRS Criminal Investigation division. We are here to give you the results of an aggressive enforcement effort we have undertaken against refund fraud caused by identity theft, which is one of the biggest challenges facing the IRS today. I also want to update you on what else is being done in our fight against refund fraud. In that fight, I can say we are doing much better on all fronts but we have much work yet to do.
Working with other federal and state agencies, we at the IRS continue to increase the pressure on identity thieves. I want to bring you up to date on the results from a massive nationwide sweep in recent weeks that targeted identity theft suspects in 32 states and Puerto Rico, involving a total of 215 cities and surrounding areas. This coast-to-coast effort was taken against 389 individuals leading to hundreds of enforcement actions in January. And it was done in virtually all instances in partnership with other federal, state or local authorities. I want to thank everybody for their efforts.
In particular, I want to express my appreciation to the Justice Department, including the Tax Division and the local U.S. Attorney’s offices, for the key role they played in this effort, which unfolded as we opened the 2013 tax season.
I’d also like to give you the bigger picture on how the IRS has been increasing its criminal enforcement efforts against identity theft over the last couple of years. We opened approximately 900 identity theft investigations in fiscal year 2012, which was triple the number we did in 2011. In the first four months of the current fiscal year, 2013, we have already opened more than 500 criminal investigations.
Total enforcement actions against identity thieves are also rapidly increasing. These include all milestones on the way to conviction, such as indictments, arrests and search warrants. In fiscal year 2012, enforcement actions totaled 2,400 against 1,310 suspects. After just four months in fiscal 2013, enforcement actions already total 1,703 against 907 suspects. And when these individuals go to jail, they’re spending an average of four years in custody. We’ve seen sentences as long as 262 months – that’s more than 20 years.
What this means is that we have increased dramatically the amount of time our special agents spend on this issue. In 2012, we spent more than a half million hours on it; this more than doubles what we did in 2011.
These numbers show the IRS is very serious about pursuing identity thieves and protecting taxpayers.
We have taken these aggressive actions because we recognize how serious a problem identity theft is for taxpayers and for the tax system. With the tax filing season now underway, we want to be clear that there is a heavy price to pay for committing refund fraud and identity theft. For anybody who may be thinking about getting involved in a refund fraud scheme, our message is clear: The IRS and its law enforcement partners at the federal and state level are going after the perpetrators of these crimes, and people are going to jail for a long time as a result.
In addition to the nationwide sweep, the IRS launched a special compliance effort in the same time period involving money service businesses. Many people call these check-cashing businesses. IRS auditors and investigators visited 197 businesses to help make sure that they are not assisting identity theft or refund fraud when they cash checks. These visits took place in 17 areas that we identified as high-risk, including Tampa, Miami, New York, Philadelphia, Chicago and Los Angeles.
As important as this enforcement work is, it is only one of three parts of a comprehensive identity theft strategy that the IRS is pursuing to protect the American taxpayer. The first part of our strategy against refund and identity fraud begins with preventing the fraudster from receiving a refund. The second part concerns how we treat victims whose refunds are caught up in the system and how fast we can get innocent people their refunds. Finally, as we have discussed there is enforcement.
And I can say that we are getting so much better in all of these areas. But we still have a bunch of work to do. I’ve spoken about enforcement, let me take a moment on preventing refunds from being paid to fraudsters.
The IRS has improved its efforts at blocking fraudulent refund claims before they are processed. We strive to screen out false returns at the earliest possible stage, and we are getting results. In fiscal 2012 we prevented the issuance of more than $20 billion in fraudulent refunds – up from $14 billion the year before. We stopped before any refund, 5 million suspicious returns this past year. And for the 2013 tax season, we are making dramatic improvements so that we can do an even better job of stopping identity thieves in their tracks. In addition, we have been issuing Identity Protection Personal Identification Numbers, or IP PINs as we call them, to taxpayers victimized by identity theft. The IP PIN is a unique identifier that shows that a particular taxpayer is the rightful filer of the return. This allows identity theft victims to avoid delays when they file future returns. In 2012 we issued 250,000 IP PINs, and for the 2013 filing season we have issued 770,000.
The IRS is also working hard to get better at helping victims of identity theft. We now have more than 3,000 employees working on identity theft-related cases – more than double the number in late 2011. And we have trained 35,000 employees who work with taxpayers to help with identity theft situations. We have also improved our processes to speed these cases. But I will tell you that we are still challenged by our inventory and folks are waiting longer than they should expect to. This will improve over the next year so that, we hope, an identity theft case should be resolved in far less time rather than today’s average. But we know that we need to do much, much more.
To taxpayers victimized by identity theft, I have a message. I want you to know that we understand your frustration, and we are working hard to get your cases resolved as quickly as we can. We know we have more work to do, and it’s my commitment that we will do everything we can to help victims resolve their cases.
But I also want the victims to know that we are committed to pursuing the identity thieves and protecting all taxpayers. The enforcement actions announced today reflect a much larger commitment by the IRS to pursue those engaging in this crime.