IRS has illegal immigration and taxes problem

Internal Revenue Service Commissioner John Koskinen said the agency is trying to figure out how to address the issue of illegal immigrants using others’ Social Security numbers — without discouraging them from filing their taxes.

When undocumented workers use other people’s SSNs to get jobs and then file their taxes using their IRS-issued individual tax identification numbers, “it’s in everybody’s interest to have them pay the taxes they owe,” Koskinen said Tuesday at a Senate Finance Committee hearing.

The question is whether the Social Security numbers have been stolen. In many cases, they have been borrowed from friends or acquaintances with permission, Koskinen said.

 “It’s not the normal identity-theft situation,” he said.

Koskinen said the IRS is looking to see if there is a way it can advise people that their SSNs were used fraudulently. In some cases, the IRS may need more authority from Congress to address the matter, he added.

The commissioner’s comments were in response to a question from Sen. Dan Coats (R-Ind.), who has been looking into the issue of employment-related identity theft.

Coats said that a couple of months ago, his staff met with staff of the Treasury Inspector General for Tax Administration. His office learned that the IRS is processing tax returns with false W-2 information, “and it issues refunds as if they were routine tax returns.” His office also learned that the IRS ignores Social Security Administration notifications of names and numbers that don’t match up. 

Employers are responsible for penalties if they submit false Social Security information, but the IRS and the SSA don’t notify companies when there is false information. Victims of employment-related identity theft are also not notified because the IRS is prohibited from informing them, despite the fact that the agency identified 200,000 new cases of employment-related identity theft last year, Coats said.

The Treasury inspector general, Russell George, said his office is “in the process now of assessing this overall issue and expect to issue our report in June of this year.” He said the IRS previously had a pilot program to address this issue but it ended.