In a report to Congress, the IRS’s National Taxpayer Advocate Nina Olson testified that there has been an astounding increase in tax-related identity theft over the past few years. "[The Taxpayer Advocate Service] experienced a 644 percent increase in identity theft case receipts from FY 2004 to FY 2007. These cases have continued to increase in FY 2008." Olson explained:
Misuse of another personâ€™s SSN or identity generally occurs in tax administration in two contexts:Â (1) the filing of a false return to obtain a fraudulent refund (refund fraud) or (2) the theft and use of another personâ€™s SSN to obtain employment (employment-related fraud). According to Federal Trade Commission (FTC) data, identity theft related to refund fraud increased 396 percent from 2002 to 2006, while employment-related identity theft incidents rose 129 percent over the same period.
The IRS plans to create a centralized unit to assist identity theft victims, which will be in place by October 1. Individuals will be able to call an identity theft hotline for help. Olson supported this unit, but said, "it is not clear to us that the IRS vision for this centralized unit mirrors ours or otherwise provides the assistance required by identity theft victims." Olson also noted, "While the IRS is reforming some aspects of its approach to identity theft, its procedures for dealing with victims have been a significant part of the problem."