Scam Spotting: Can the IRS Effectively Protect Small Business Information?

Apr 6, 2017

Congresswoman Nydia Velazquez, Ranking Member
House Committee on Small Business
“Scam Spotting: Can the IRS
Effectively Protect Small Business Information?”
Thursday, April 6, 2017

It’s the first week of April and that means tax day is right around the corner. Over the next few weeks, millions of Americans will be trying to get their taxes filed on time. But, this time of year also brings out criminals who target individual taxpayers, business owners, and tax preparers. 
In recent years, thousands of people have lost millions of dollars and their personal information to tax scams and fake IRS communication. The Association of Certified Fraud Examiners’ found that a typical organization loses an average of 5 percent of revenues each year due to fraud – translating to $3.7 trillion total.
And although, we typically hear of scams targeting individual taxpayers via phishing emails and phone calls –small businesses are actually more vulnerable. Whether it is a lack of awareness or savvy criminals, small firms and their tax preparers are increasingly becoming the focus of identity theft. 
Small business owners are already hampered by compliance costs and the worry over data security adds an additional layer to that complexity. Identity theft - and the refunds claimed from it - has become an increasing problem the IRS is battling to address. 
In fact, the agency said it rejected 1.8 million fraudulent returns filed in 2014, worth $22.5 billion in refunds. Unfortunately, the IRS also paid out approximately $3.1 billion in fraudulent returns.
Not only must the IRS protect itself from fraud, they are also tasked with alerting taxpayers to popular tax scams. Every year, the IRS releases its “Dirty Dozen”– a list of scams from phishing, phone scams, preparer fraud, and employer noncompliance schemes.
In addition to publications, the IRS took steps to bring all stakeholders to the table for their Security Summit Initiative – a public-private partnership to amplify security risks and design new and innovative safeguards. The summit has led to a more active role by taxpayers in protecting their personal and financial information. 
While, this is a step in the right direction, more must be done to address the needs of small business taxpayers and their battle against criminals. Today’s hearing will give us the chance to hear from the Treasury Inspector General for Tax Administration about how the IRS is educating, mitigating, and preventing scams for its small business customers. 
I hope we can take the lessons from the audits performed by TIGTA and develop multi-tiered approaches to combat identity theft and other scams harming our nation’s small businesses. 
However, we must also recognize that the IRS is under fiscal strain from consistent budget cuts. It is up to Congress to give them the resources they need to adequately serve taxpayers. 
In advance of the testimony, I want to thank Mr. George for his participation and insights into this important topic.