IRS Commissioner Details Growing Problem Of Taxpayer Identity Theft

AUDIE CORNISH, HOST:

It's the time of year that nobody likes to think about - tax season. And if you haven't already filed, you've got until April 18. With tax season comes scams, phones scams, website scams. People try to steal your identity or claim a refund in your name. And it's a fast-growing problem. Nobody knows that more than IRS Commissioner John Koskinen. Welcome to the program.

JOHN KOSKINEN: Thanks very much. I'm delighted to be here.

CORNISH: Now, we hear about these taxpayer identity scams year after year. Last year alone, the IRS topped 1.4 million in returns because of identity theft. Why does the problem seem to be getting worse and not better?

KOSKINEN: Well, it's actually not getting worse; it's getting more visibility. But it is getting more visibility and more complicated because we're now dealing with increasingly organized crime syndicates around the world, rather than individual entrepreneurs off the street.

CORNISH: You said that the problem is becoming more visible, not necessarily getting worse. Can you describe the latest trend in these scams? I mean, what should people be looking out for?

KOSKINEN: Well, I think the latest trend in these scams is, as we get better at the basic protections, then the criminals are looking for other ways into the system. With their sophisticated ability to masquerade as taxpayers, they're beginning to try to figure out, can they, in effect, get access to the taxpayers previous tax return - because then they could file a false return that looks more logical and isn't as likely to be caught by our filters. At the same time, this is not an IRS problem alone, obviously. There are criminals hacking into systems all across the world, really. The goal they have is to get detailed individual information that allows them to commit fraud.

CORNISH: And you've been saying that cyber-criminals are becoming more sophisticated and find new methods of stealing personal information, so how is the IRS keeping up with that?

KOSKINEN: The biggest thing we've done in the last year is create a partnership with the private sector, tax preparers, software developers, payroll providers and state tax commissioners. We've all agreed that none of us by ourselves can stop this program and this problem. All of need to work together in a unified way for the first time, really, in history to protect taxpayers and protect their identities to the extent we can answer and certainly to protect their data.

CORNISH: You talk about partnership with the tech industry. What's it like actually trying to recruit young tech people to work for the IRS to do this kind of thing?

KOSKINEN: Well, when we advertise, we get a significant number of applicants. Our biggest problem is we're not hiring anybody at all virtually because the only way we can deal with the budget cuts we've over the last six years has been to not replace people when they leave, let alone hire new people. And that's because over 70 percent of our budget are people.

CORNISH: Last year, the IRS itself was a victim of a hack. One of its data systems was breached, and more than 700,000 taxpayer accounts may have been compromised. How has this contributed to problems this year going forward?

KOSKINEN: Basic taxpayer information was not breached or obtained. That was an application that allowed taxpayers to authenticate themselves and get copies of prior year tax returns. They had already stolen enough data, Social Security numbers, name and other identifiers that they could masquerade as the taxpayers. And what they were after was, if they could get last year's tax return, we'd be less likely to stop this year's fraudulent return. The net result of that is we have, of course, notified all the taxpayers and marked all of those accounts so that we think the amount of actual refunds paid out is relatively modest. But it was a serious representation of the sophistication of the enemy that we're dealing with, so we have - took that application down a year ago, and we are working at improving significantly the authorization required to get into any of those applications.

CORNISH: John Koskinen - he's the IRS commissioner. Thank you so much for speaking with us.

KOSKINEN: It's my pleasure. Thank you. Transcript provided by NPR, Copyright NPR.