Press Releases

January 31, 2013

Congressmen Dent and Gerlach Fight Multi-Billion Dollar Tax Fraud Scam and Social Security Number Identity Theft

Congressman Jim Gerlach (PA-6) and Congressman Charlie Dent (PA-15) held a press conference with Berks County DA John Adams and Lehigh County DA Jim Martin to discuss their efforts to combat a tax fraud scam that is costing taxpayers billions of dollars per year and fight identity theft.

The Scam Outlined

  • Perpetrators buy lists of personal identification information for Puerto Rican citizens who are not required to pay federal income tax
    • Puerto Rican citizens only need to file a U.S. federal income tax return with the United States if they have earned income in the continental U.S. or if they are employees of the U.S. Government
    • Fraudulent federal tax returns are prepared and filed using the stolen Taxpayer Identification Numbers (TIN)
    • In some cases perpetrators solicit the help of U.S. mail carriers to intercept the fraudulently issued tax refund checks
    • The tax refund checks are cashed at one-stop check cashing establishment

The Impact (Facts and Figures)

  • The tax returns are usually around $5,000 to $7,000
  • A single Social Security number from Puerto Rico goes for about $8-$10 on the black market.
  • This fraud scheme appears to be in the billions of dollars
  • In 2011, the IRS reported 938,664 fraudulent returns related to identity theft totaling $6.5 billion, and 582,000 taxpayers who were the victims of identity theft

Berks County District Attorney John Adams opened the press conference by noting the pervasiveness of this type of crime.

“Tax fraud has become the single most profitable scam that has taken place in our county.  While local law enforcement has recently been given some tools to combat this problem, it is still incumbent upon the Internal Revenue Service to implement controls to prevent this fraud from being perpetrated.  It is important that the IRS arrest those involved in this fraud.  Local law enforcement remains committed to prosecuting cases locally and to assisting federal agents in stopping this problem.  I appreciate Congressman Dent and Gerlach’s interest in this issue and support his efforts to notify the Washington bureaucracy that this problem needs to be stopped now.”

Lehigh County District Attorney Jim Martin concurred.

“The investigation and prosecution of Federal Income Tax fraud cases is complex and time-consuming. It is labor-intensive and made more difficult by the constraints imposed upon the IRS with respect to its ability to share information with law enforcement. We need to strengthen local law enforcement’s access to information and there should be an incentive to promote the investigation and prosecution effort at the local level. This is a billion dollar racket which is funding other criminal enterprise and needs to be attacked vigorously.”

Congressman Dent agreed with the statements of both District Attorneys. Congressman Dent believes that this scam needs to be stopped at the source, in this case the procedure used by the IRS to disburse refund checks. That’s the rationale behind Congressman Dent’s introduction of H.R. 353.

“Local law enforcement personnel are being forced to dedicate time and resources to combat a crime that is occurring because of data management issues at the IRS,” said Dent. “H.R. 353 requires the IRS to devise a system that will determine if a citizen has filed a U.S. federal income tax return in the United States and in another territory or possession under the same taxpayer identification number. This would stop the potential for fraud at the source,”added Dent.

H.R. 353 Explained: 

  • Would address this issue from the front end
  • HR 353 would require the Secretary of the Treasury to implement a program to prevent the fraudulent use of taxpayer identification numbers of residents of United States territories and possessions to be used to obtain a credit or refund on tax returns filed with the United States.
  • Specifically, the legislation would require the Treasury Secretary to implement a system to compare income tax returns filed with the United States against those filed with any territory or possession, under the same taxpayer identification number.
  • This would allow the IRS to see if a “Jane Rodrigues” (for example) has filed a return in Puerto Rico under the TIN 123-45-6798 at 101 San Juan St, San Juan, PR, and to recognize that there is also a return for “Jane Rodrigues” filed with the United States under the same TIN at 101 Anystreet in Allentown, PA.

Congressman Gerlach applauded the efforts of Congressman Dent and District Attorneys Adams and Martin to protect taxpayers and prosecute those looking to profit from identity theft and tax-fraud schemes.

“We owe it to hard-working taxpayers to come up with new solutions and provide law enforcement with the tools they need to protect public resources,” Gerlach said.

As a member of the House Ways & Means Committee, Gerlach has worked to pass legislation that would address the rising threat of identity theft and root out waste and improper payments.

In December, the House passed H.R. 1509, the proposed Medicare Identity Theft Prevention Act, which would remove Social Security numbers from the front of the Medicare cards that many seniors carry in their wallets and pocketbooks.

The legislation also incorporated language from a bill that Gerlach sponsored requiring the U.S. Government Accountability Office (GAO) to study utilizing smart card technology to eliminate an estimated $48 billion per year in improper or fraudulent Medicare payments each year – or nearly 10 percent of the total Medicare budget.

“While today’s Medicare card provides seniors’ access to the healthcare services they need, that small piece of plastic can provide the narrow opening unscrupulous individuals exploit to snatch identities and cheat taxpayers and seniors out of billions of dollars every year,” Gerlach said. “That’s a significant amount of resources that could be helping our seniors pay for hospital visits, prescription drugs and other vital medical care. Eliminating fraud and improper payments is critical to strengthening and preserving Medicare for current and future retirees.”

Dent thanked his fellow participants and closed by stating:

“We are dealing with big issues in Washington right now. Our debt stands at nearly $16.4 trillion and our federal deficit has exceeded $1 trillion for the past four years. To get our deficit under control, we are going to have to make tough but smart decisions about our spending priorities. We are going to have to take steps to protect and strengthen our entitlement programs. We are going to have to identify and address waste, fraud and abuse. We can save billions of dollars right here. This is a small but important step in righting our fiscal trajectory and protecting our citizens.

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