Senate Finance Committee Approves Legislation Addressing Taxpayer Identity Theft; AICPA Seeks Focused Regulation of Tax Preparers

April 26, 2016

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The Senate Finance Committee on April 20 passed legislation designed to help curb identity theft and tax refund fraud.  Committee Chairman Orrin Hatch (R-Utah) said the measure “aims to put more tools in the proverbial toolbox, and, going forward, the committee will remain vigilant as we seek to identify additional measures that will allow us to detect and prevent stolen identity refund fraud.”

Hatch also cited an AICPA survey which found that 63 percent of CPAs reported that at least one of their clients was a victim of tax identity theft in the 2015 filing season.

In welcoming the Committee’s action, Edward Karl, CPA, CGMA, AICPA vice president for taxation, noted, “We have previously supported and continue to favor addressing identity theft, including expansion of the Identity Protection PIN system to all taxpayers, making it a felony for a person to use a stolen identity to file a return, increased electronic filing of returns by paid tax return preparers, and reports to Congress by the GAO about identity theft and tax refund fraud.”

During the committee’s markup (the process by which committees debate, amend and rewrite proposed legislation), Ranking Member Ron Wyden (D-Ore.) proposed an amendment that contained many of the AICPA’s longstanding recommendations to protect the public from incompetent and fraudulent tax preparers, including granting the IRS the authority to revoke Preparer Tax Identification Numbers (PTINs), requiring only those signing a return to obtain a PTIN and mitigating marketplace confusion by requiring unlicensed PTIN holders who advertise to direct taxpayers to the IRS website where differences between preparers are explained.

Wyden’s amendment – endorsed by the AICPA in a letter to committee members – was not adopted, but the provisions are expected to resurface and may signify that Congress will act on the targeted approach to preparer regulation favored by the CPA profession.