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IDENTITY THEFT AND 

INCOME TAX PREPARATION FRAUD 

HEARING 

BEFORE THE

SUBCOMMITTEE ON CRIME, TERRORISM, 

AND HOMELAND SECURITY 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

JUNE 28, 2012 

Serial No. 112–126 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

LAMAR SMITH, Texas, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

DENNIS ROSS, Florida 

SANDY ADAMS, Florida 

BEN QUAYLE, Arizona 

MARK AMODEI, Nevada 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

JARED POLIS, Colorado 

RICHARD HERTLING, Staff Director and Chief Counsel 

PERRY APELBAUM, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON CRIME, TERRORISM, AND HOMELAND SECURITY

F. JAMES SENSENBRENNER, JR., Wisconsin, Chairman 

LOUIE GOHMERT, Texas, Vice-Chairman 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

J. RANDY FORBES, Virginia 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

SANDY ADAMS, Florida 

MARK AMODEI, Nevada 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

JUDY CHU, California 

TED DEUTCH, Florida 

SHEILA JACKSON LEE, Texas 

MIKE QUIGLEY, Illinois 

JARED POLIS, Colorado 

CAROLINE LYNCH, Chief Counsel 

BOBBY VASSAR, Minority Counsel 

(III) 

C O N T E N T S 

JUNE 28, 2012 

Page 

OPENING STATEMENTS 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, and Ranking Member, Committee on the Judiciary ......... 2 

The Honorable Lamar Smith, a Representative in Congress from the State 

of Texas, and Chairman, Committee on the Judiciary ..................................... 3 

WITNESSES 

Rebecca Sparkman, Director, Operations, Policy, and Support, Criminal Investigation Division, Internal Revenue Service 

Oral Testimony ..................................................................................................... 5 

Prepared Statement ............................................................................................. 6 

Nina E. Olson, United States Taxpayer Advocate, Office of the Taxpayer 

Advocate, Internal Revenue Service 

Oral Testimony ..................................................................................................... 13 

Prepared Statement ............................................................................................. 15 

Sanford Zinman, National Tax Chair, National Conference of CPA Practitioners (NCCPAP) 

Oral Testimony ..................................................................................................... 44 

Prepared Statement ............................................................................................. 45 

Michael Robinson, Victim of Income Tax Preparation Fraud 

Oral Testimony ..................................................................................................... 49 

Prepared Statement ............................................................................................. 51 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, and Ranking Member, Committee 

on the Judiciary ................................................................................................... 2 

Prepared Statement of the Honorable Louie Gohmert, a Representative in 

Congress from the State of Texas, and Vice-Chairman, Subcommittee on 

Crime, Terrorism, and Homeland Security ........................................................ 58 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable Robert C. ‘‘Bobby’’ Scott, a Representative in Congress from the State of Virginia, and Ranking Member, Subcommittee on Crime, Terrorism, and Homeland Security ................................ 69 

(1) 

IDENTITY THEFT AND 

INCOME TAX PREPARATION FRAUD 

THURSDAY, JUNE 28, 2012 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON CRIME, TERRORISM, AND HOMELAND SECURITY, COMMITTEE ON THE JUDICIARY, Washington, DC. 

The Subcommittee met, pursuant to call, at 9:48 a.m., in room 

2141, Rayburn House Office Building, the Honorable Louie 

Gohmert (Vice-Chairman of the Subcommittee) presiding. 

Present: Representatives Gohmert, Smith, Marino, Scott, Conyers, and Cohen. 

Staff Present: (Majority) Caroline Lynch, Subcommittee Chief 

Counsel; Sarah Allen, Counsel; Lindsay Hamilton, Clerk; (Minority) Bobby Vassar, Subcommittee Chief Counsel; Joe Graupensberger, Counsel; Ashley McDonald, Counsel; and Veronica Eligan, 

Professional Staff Member. 

Mr. GOHMERT. Thank you for being here today. This hearing of 

the Crime, Terrorism, and Homeland Security Subcommittee will 

come to order. 

Today’s hearing on identity theft and income tax preparation 

fraud is an important hearing. Especially like to welcome our witnesses. We appreciate your being here and look forward to your 

testimony. 

Joined by my colleague from Virginia, the distinguished Ranking 

Member of the Subcommittee, Bobby Scott. We are also pleased to 

be joined by Ranking Member Conyers, the former Chairman of the 

Committee, and Chairman Lamar Smith should be here shortly. 

So, and when he comes, I understand he has an opening statement. 

I have an opening statement, but because the Speaker has called 

a conference for 10:30 a.m., I don’t want to run out of time and 

have left one of you to have to come back after a recess. So I will 

reserve my opening statement for later and proceed. 

Ranking Member Mr. Scott, I understand, has a statement, and 

so we yield to Mr. Scott for his opening statement. 

Mr. SCOTT. Thank you, Mr. Chairman. 

And in light of your statement of the time, I will just thank you 

for calling the hearing. You will recall that Representatives Cohen, 

Rigell, and Thompson wrote in requesting a hearing, particularly 

as it pertains to Mo’ Money Taxes. 

We will hear from our witnesses about that, and I reserve the 

balance of my time. I will yield back the balance of my time. 

2 

Mr. GOHMERT. All right. Well, thank you, Mr. Scott. And we will 

certainly yield later after we hear from the witnesses. 

Well, then at this time, Mr. Conyers, would you care to make an 

opening statement? 

Mr. CONYERS. Yes, sir. 

Mr. GOHMERT. I will yield to you. 

Mr. CONYERS. And I will keep it brief in light of the custom of 

my Subcommittee Chairman and my distinguished Ranking Member. 

But this is an important hearing. Identity theft and tax preparation fraud. Now this is bothering apparently a lot of people, and we 

are glad that all of you witnesses are here for it. 

The message that is really getting my interest is the alert sent 

out by the Better Business Bureau of Western Michigan, a consumer alert about the national tax preparation company Mo’ 

Money Taxes, of which there are plenty of offices in Detroit and the 

state of Michigan. Its home office is Memphis, Tennessee. 

Consumers are complaining that their refunds were promised in 

January. Some of the Mo’ Money offices are closed. Some don’t answer their phones or return calls. Some blame the IRS. Mo’ Money 

blames the IRS. 

And so, I would like to hear a lot more about that, and I will put 

the rest of my statement in the record, Mr. Chairman, but note 

that identity fraud is a $37 billion cost in America, and we think 

that this is worthy of this hearing. 

I commend my leaders on this Subcommittee for dealing with 

this problem and ask unanimous consent to put my statement into 

the record. 

Mr. GOHMERT. Without objection, it will be so entered and appreciate the statement. 

[The prepared statement of Mr. Conyers follows:] 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, Ranking Member, Committee on 

the Judiciary, and Member, Subcommittee on the Constitution 

Thank you, Chairman, for this hearing on these important issues of identity theft 

and income tax preparation fraud. I would like to welcome all of today’s witnesses, 

and especially Mr. Michael Robinson. I understand Mr. Robinson will testify today 

about his experience with the Mo Money tax company, and I want to express my 

appreciation for him joining us today. 

Identity theft and income tax preparation fraud are serious problems. In assessing 

whether a legislative response is required, there are several issues we should consider. 

To begin with, we must recognize that identity fraud is a costly problem 

that affects many Americans. For example, about 8.1 million Americans in 2010 

were reportedly victims of identity fraud. The cost of this fraud was an astounding 

$37 billion. For one specific type of identity theft—tax fraud through identity theft— 

the IRS estimates that it paid as much as $5.2 billion in fraudulent returns in 2010. 

In addition, identity fraud is not just a matter of money; it can ruin one’s personal 

financial life in numerous respects. 

Once perpetrators of identity fraud have someone’s personal information, they can 

wreak havoc. 

They can use the information to: 

• obtain credit cards in the victim’s name; 

• establish bank accounts in the victim’s name and write bad checks; 

• take out a loan in the victim’s name; 

3 

• obtain a driver’s license or official ID card issued in the victim’s name but with 

their picture; 

• use the victim’s name and Social Security number to get government benefits; 

and 

• file a fraudulent tax return using the victim’s information so that they can get 

the refund. 

Victims of this crime often are forced to expend substantial time and money to 

address these problems. 

Of equal concern is the fact that these identity theft perpetrators can sell personal 

information to other criminals, including terrorists, who seek to elude law enforcement detection efforts. 

Most importantly, in addressing this serious crime, we must fashion a serious solution. 

Our colleague, Representative Wasserman Schultz, introduced H.R. 4362, the 

‘‘STOP Identity Theft Act of 2012.’’ 

This bill directs the Department of Justice to undertake a series of meaningful 

efforts. It requires the Department to pursue more prosecutions of tax return identity theft and expands the definition of victims of identity theft to include organizations in addition to individuals. 

In addition, the bill requires the Department to report on the incidence of tax return identity theft and enforcement efforts. 

All of these provisions of the bill would result in real improvements to the law. 

I am concerned, however, that H.R. 4362 would also add tax fraud as a predicate 

for aggravated identity theft under section 1028A(c) of title 18 of the United States 

Code. 

The penalty for aggravated identity theft is a mandatory term of imprisonment 

of two years or, for a terrorism offense, five years. H.R. 4362 therefore includes a 

mandatory minimum by adding a new crime (tax fraud) to a statute (aggravated 

identity theft) that already has a mandatory minimum. 

As we have discussed in this committee many times, mandatory minimum sentencing laws require automatic prison terms for those convicted of certain crimes, 

without allowing the judge to take the facts and circumstances of the crime or the 

defendant in the particular case into account. 

Identity theft crimes need stiff punishments, and even increased punishments, 

but mandatory sentences are problematic. I look forward to working with Ms. 

Wasserman Schultz and Chairman Smith to explore ways to combat identity theft 

without mandatory minimums. 

I also plan to introduce a bill that will increase the statutory maximum for aggravated identity theft but delete the mandatory minimums currently included in section 1028A(c) of title 18 of the United States Code. 

I look forward to discussing the problem of identity fraud at today’s hearing and 

to explore ways to curtail this crime. 

Mr. GOHMERT. And we have the Chairman of the full Committee, 

Chairman Smith. Recognize you for an opening statement. 

Mr. SMITH. Thank you, Mr. Chairman. 

In 2010, a couple from Fort Worth, Texas, lost their daughter a 

week after she was born. That year, when they filed their tax returns, they found that someone had profited from the death of their 

newborn baby by fraudulently claiming their deceased daughter as 

a dependent. 

The following year, the same thing happened to some friends of 

the couple who also had lost a young child. In addition to dealing 

with their grief, these two families were forced to fight through the 

Federal tax system to set the record straight. 

Unfortunately, the fraud committed against these two Texas 

families is not an isolated event. Tax fraud through identity theft 

is a rapidly growing problem in the United States. The number of 

these thefts has increased by approximately 300 percent every year 

since 2008. The Internal Revenue Service detected almost 1 million 

fake returns among the 2010 returns alone. 

4 

Tax thieves victimize innocent taxpayers in a number of ways. 

They often file fake returns under a false name or claim someone 

who is no longer alive as a dependent on their own forms. Often, 

the fraud is not detected until an individual files a legitimate tax 

return that is rejected by the IRS because a false return has already been filed and the refund paid. 

Tax return identity theft is a very real problem. Congress should 

do all it can to protect citizens from this crime. I am an original 

cosponsor of H.R. 4362, the Stop Identity Theft Act of 2012, along 

with Congresswoman Debbie Wasserman Schultz. This is a bipartisan bill that strengthens criminal penalties for tax return identity 

thieves. 

H.R. 4362 adds tax return fraud to the list of predicate offenses 

for aggravated identity theft and expands the definition of an identity theft victim to include businesses and charitable organizations. 

It also improves coordination between the Justice Department and 

State and local law enforcement officials in order to better protect 

groups that are most vulnerable to tax fraud so they are not future 

victims. 

The changes to Federal law proposed by H.R. 4362 are important 

to keep pace with this ever-increasing crime. Tax identity theft cost 

American families and taxpayers millions of dollars each year. We 

can help reduce the number of people who are victimized by this 

crime. 

So thank you, Mr. Chairman, and I thank the witnesses for being 

here as well and yield back the balance of my time. 

Mr. GOHMERT. Thank you, Mr. Chairman. 

At this time, it is my pleasure to introduce today’s witnesses. 

First, we have Ms. Rebecca Sparkman, serves as Director of Operations, Policy, and Support in the Criminal Investigation Division 

of the Internal Revenue Service. Prior to this position, Ms. 

Sparkman served as special agent-in-charge of the IRS Washington, D.C., field office with the Criminal Investigation. 

Ms. Sparkman began her IRS career in 1987 as a student trainee 

internal revenue agent and student trainee special agent in Riverside, California. She became a special agent in 1988 and has served 

several supervisory positions, including Deputy Director of Operations, special agent-in-charge of the Atlanta field office, executive 

assistant to the Chief of the Criminal Investigation Division, and 

counterterrorism coordinator to the Deputy Commissioner of Services and Enforcement. 

Ms. Sparkman has most recently acted as the Director of Technology, Operations, and Investigative Services, and the Executive 

Director of the Investigative and Enforcement Operations for 

Criminal Investigation. 

Ms. Sparkman holds a bachelor of science degree in accounting 

from California Baptist University. 

At this time, Ms. Sparkman, we will recognize you for a statement, and please consider and understand that we will accept your 

full written statement as part of the record. But for purposes of 

these hearings, both Members and witnesses are restricted to 5 

minutes for their statement, and you can watch the lights go from 

green to yellow to red to let you know time is up. 

So thank you, Ms. Sparkman. We appreciate it. 

5 

TESTIMONY OF REBECCA SPARKMAN, DIRECTOR, OPERATIONS, POLICY, AND SUPPORT, CRIMINAL INVESTIGATION 

DIVISION, INTERNAL REVENUE SERVICE 

Ms. SPARKMAN. Thank you. 

Chairman Gohmert, Ranking Member Mr. Scott, Mr. Conyers, 

and Members of the Subcommittee, my name is Rebecca 

Sparkman, and I am the Director of Operations, Policy, and Support in the Criminal Investigation Division of the Internal Revenue 

Service. And I appreciate the opportunity to testify on the important issues of identity theft and return preparer fraud. 

The work being done by the Criminal Investigation Division is a 

key component of the IRS’s overall refund fraud strategy, which 

combats both identity theft and return preparer fraud. In these 

cases, there are at least two victims for each crime—the innocent 

person whose identity information is used to file a false return and 

the U.S. Treasury when the fraudulent refund goes out the door. 

Both are harmed, and both must work to rectify the situation. 

The Criminal Investigation Division will more than double its investigative work on identity theft in 2012. We have already initiated 576 criminal cases, compared to 276 for all of last year, and 

we have obtained over 300 indictments, compared to 165 last year. 

This past January, the IRS conducted a coordinated enforcement 

sweep related to identity theft in partnership with the Justice Department’s Tax Division and local U.S. attorney’s offices, which led 

to more than 900 criminal charges across 23 States. The Criminal 

Investigation Division continues to partner with Federal, State, 

and local law enforcement, including participation by our special 

agents throughout the country in task forces and working groups 

that target tax-related identity theft crimes. 

About 60 percent of Americans use paid professionals to prepare 

and file their tax returns. Most return preparers provide honest 

service to their clients. But as in any other business, there are also 

some who prey on unsuspecting taxpayers. 

Unfortunately, unscrupulous return preparers have been known 

to promise guaranteed or inflated refunds, skim off part or all of 

the refund, hijack returns, which takes personal information of 

former or potential clients and files false returns when the client 

did not intend to file a return. And they also conspire with others 

in identity theft schemes because they have access, and they are 

familiar with the IRS’s filing systems. 

Like our case work in identity theft, cases involving return preparer fraud by the Criminal Investigation Division in 2012 is on 

pace to increase from that of last year. While criminal investigations and the resulting prosecutions are critical to deterring tax 

crimes related to identity theft and return preparer fraud, it cannot 

totally prevent them from occurring. 

The IRS must continually work to improve its processes and programs to detect and prevent these crimes. The harm that is inflicted by identity theft or return preparer fraud on innocent taxpayers is a problem that we take very seriously. The IRS has made 

several key improvements in a number of detection and prevention 

programs since 2011. 

We have developed new screening filters to improve our ability 

to spot false returns. We implemented special identity protection 

6 

personal identification numbers, or PINs, for victimized taxpayers. 

We have launched a pilot program to aid local law enforcement in 

obtaining tax return data vital to their identity theft investigations. 

We are collaborating with software developers, banks, and other 

industries to better detect fraud. We have improved outreach and 

case resolution to assist taxpayers who have been victimized. We 

have deployed a return preparer initiative requiring registration 

for paid return preparers, as well as competency testing and continuing education. 

Overall, IRS programs identified and prevented the issuance of 

over $14 billion in fraudulent refunds in 2011, a subset of which 

includes identity theft and a portion of return preparer fraud. 

Fighting refund fraud will be an ongoing battle for the IRS and 

one where we cannot afford to let up. The landscape is constantly 

changing as identity thieves continue to create new ways of stealing personal information to use it for illicit gain, and unscrupulous 

return preparers are constantly formulating new schemes to hide 

their fraud. 

At the IRS, we will continue to review our processes and policies 

to ensure that we are doing everything possible to minimize the incidence of fraud, help those who find themselves victimized by it, 

and bring to justice those who perpetrate these crimes. 

Mr. Chairman, I thank you for the opportunity to appear before 

the Subcommittee and describe the steps that the IRS is taking to 

combat identity theft and return preparer fraud, especially the 

work of the Criminal Investigation Division in these areas. And I 

would be happy to answer any questions. 

Thank you. 

[The prepared statement of Ms. Sparkman follows:] 

Prepared Statement of Rebecca Sparkman, Director, Operations, Policy 

and Support, Criminal Investigation Division, Internal Revenue Service 

INTRODUCTION AND SUMMARY

Chairman Sensenbrenner, Ranking Member Scott and Members of the Subcommittee on Crime, Terrorism and Homeland Security, my name is Rebecca 

Sparkman and I am the director of operations, policy and support in the Criminal 

Investigation division of the Internal Revenue Service. I appreciate the opportunity 

to testify on the important issue of identity theft and also discuss actions that the 

IRS is taking in the area of return preparer fraud. 

Over the past few years, the IRS has seen a significant increase in refund fraud 

schemes in general and schemes involving identity theft in particular. Identity theft 

and the harm that it inflicts on innocent taxpayers is a problem that we take very 

seriously. The IRS has a comprehensive identity theft strategy comprised of a twopronged effort, focusing both on fraud prevention and victim assistance. 

Identity theft is the use of another person’s identifying information stolen from 

a wide variety of places and through a wide variety of means. With respect to the 

IRS, identity theft manifests itself in several ways. First, it is used to defraud the 

government of funds through the filing of fraudulent refund claims. Second, in many 

instances it victimizes an innocent taxpayer by impeding his or her ability to get 

a refund from us. Fraudulent filings may also cause us to initiate an adverse enforcement action against the innocent taxpayer. There are also many instances 

where the identity stolen is not of an active filer so there is less immediate impact 

on the real taxpayer. In these instances, the identity may belong to a deceased individual or an individual without a filing requirement. In this category, the IRS is 

faced with fraud, but there is less immediacy in the need to assist the correct taxpayer because there is no return filed or other IRS activity underway with respect 

to that individual. 

7 

At the start let me say quite plainly that the IRS is confronted with the same 

challenges as every major financial institution in preventing and detecting identity 

theft. The IRS cannot stop all identity theft. However, we have improved and we 

are committed to continuing to improve our programs. We can and will continue to 

work to prevent the issuance of fraudulent refunds and we can and will continue 

to work with innocent taxpayers to clear their accounts and/or get them their money 

faster in a courteous and professional manner. 

The IRS has also taken actions to be better prepared in both fraud prevention and 

victim assistance. On the prevention side, this means implementing new processes 

for handling returns, new filters to detect fraud, new initiatives to partner with 

stakeholders and a continued commitment to investigate the criminals who perpetrate these crimes. 

The work being done by our Criminal Investigation division is a key component 

of our overall refund fraud and identity theft strategy. We have been increasing our 

investigations of fraud related to identity theft, and expanding our efforts to work 

with other divisions within the IRS as well as with local law enforcement and other 

federal agencies in this area. 

As for victim assistance, the IRS is working to speed up case resolution, provide 

more training for our employees who assist victims of identity theft, and step up 

outreach to and education of taxpayers so they can prevent and resolve tax-related 

identity theft issues quickly. 

The improvements that the IRS is making would not be possible without the additional resources that we have directed toward these programs. We have substantially increased our resources devoted to both prevention and assistance. Even in 

a declining budget environment, we are hiring and training additional staff to address the growing challenge of identity theft. 

Fighting identity theft will be an ongoing battle for the IRS and one where we 

cannot afford to let up. The identity theft landscape is constantly changing, as identity thieves continue to create new ways of stealing personal information and using 

it for their gain. We at the IRS must continually review our processes and policies 

to ensure that we are doing everything possible to minimize the incidence of identity 

theft, to help those who find themselves victimized by it, and to investigate those 

who are committing the crimes. 

And yet there is a delicate balance here. We cannot manually inspect 100 million 

refunds to ensure all are correct—nor is there any justification for doing so. That 

is neither practical nor in keeping with Congressional intent. The IRS has a dual 

mission when it comes to refunds, particularly when they are generated in whole 

or in part by tax credits. Refundable and other tax credits are provided to achieve 

important policy goals, such as relieving poverty, encouraging work, or boosting the 

economy. The IRS must deliver refunds in the intended time frame, while ensuring 

that appropriate controls are in place to minimize errors and fraud. We must balance the need to make payments in a timely manner with the need to ensure that 

claims are proper and taxpayer rights are protected. 

So it is indeed a difficult challenge to strike the right balance. The IRS’ approach 

to tackling identity theft must be multi-faceted. We are improving processes to prevent fraudulent filings from being processed as well as identifying promoters and 

other schemes. We are aggressively pursuing perpetrators of tax fraud from identity 

theft to bring them to justice. We are also taking actions to improve handling of 

identity theft cases and to better serve taxpayers whose identities have been stolen 

for tax purposes. All of this is being done within a very difficult budget environment. The Administration’s FY 2013 Budget request includes important funding for 

additional enforcement initiatives focused specifically on addressing refund fraud, 

including identity theft. Let me walk through our work to prevent the fraud up 

front and how we hope to improve our service to the victims of identity theft. 

PREVENTING FRAUD FROM IDENTITY THEFT

Tax filings can be affected by identity theft in various ways. For example, an identity thief steals a legitimate taxpayer’s personal information in order to file a fake 

tax return and attempt to obtain a fraudulent refund. There are also instances 

where the identity stolen is of an individual who is deceased or has no filing requirement. 

Overall, IRS identified and prevented the issuance of over $14 billion in fraudulent refunds in 2011. Identity theft is a subset of this overall refund fraud. From 

2008 through May 2012, the IRS identified approximately 550,000 taxpayers who 

have been affected by identity theft. The IRS is committed to improving its approaches to blocking these fraudulent refund claims. To that end, we strive to procVerDate Aug 31 2005 13:07 Sep 12, 2012 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6621 H:\WORK\CRIME\062812\74819.000 HJUD1 PsN: DOUGA
8 

ess returns in such a way that potentially false returns are screened out at the earliest possible stage. 

Catching the Refund at the Door—Enhanced Return Processing 

Identity theft is a key focus of an IRS program launched in 2011. Under this program, the following improvements have been made: 

• Various new identity theft screening filters are in place to improve our ability 

to spot false returns before they are processed and before a refund is issued. 

For example, new filters were designed and launched that flag returns if certain 

changes in taxpayer circumstances are detected. 

• Moreover, this filing season, we have expanded our work on several fraud filters 

which catch not only identity but other fraud. In this area we have already 

stopped more returns this filing season than we stopped all last calendar year. 

• We have implemented new procedures for handling returns that we suspect 

were filed by identity thieves. Once a return has been flagged, we will correspond with the sender before continuing to process the return. 

• We are issuing special identification numbers (Identity Protection Personal 

Identification Numbers or IP PINs) to taxpayers whose identities are known to 

have been stolen, to facilitate the filing of their returns and prevent others from 

utilizing their identities. 

• We have accelerated the availability of information returns in order to identify 

mismatches earlier, further enhancing our ability to spot fraudulent tax returns 

before they are processed. 

• We are leveraging mechanisms to stop the growing trend of fraudulent tax returns being filed under deceased taxpayers’ identities. We are also working with 

the Social Security Administration in order to more timely utilize the information SSA makes available to us. 

• We have also developed procedures for handling lists of taxpayers’ personal information that law enforcement officials discover in the course of investigating 

identity theft schemes or other criminal activity. This is extremely valuable 

data that can be used to flag taxpayer accounts and help us block returns filed 

by identity thieves who have used the personal information of these taxpayers. 

The Criminal Investigation (CI) division will utilize this data to ensure linkages 

are identified between criminal schemes and will also ensure that the information is shared appropriately to affect victim account adjustment and protection 

activity. 

• We expanded the use of our list of prisoners to better utilize the list to stop 

problematic returns. We have collaborated with the Bureau of Prisons for many 

years to help identify Federal prisoners who may be engaged in tax fraud, and 

we received additional help under the United States-Korea Free Trade Agreement Implementation Act passed in 2011 that requires federal and state prisons 

to provide information on the current prison population. Unfortunately, the authority allowing us to share return information with prisons expired at the end 

of 2011. The Administration’s FY 2013 Budget proposal would reinstate the provision authorizing the IRS to disclose return information with respect to individuals incarcerated in Federal or State prisons whom the IRS determines may 

have filed or facilitated the filing of a false return. 

• We are also collaborating with software developers, banks, and other industries 

to determine how we can better partner to prevent theft. 

Stopping It Before It Starts—Criminal Investigation Work 

The investigative work done by the Criminal Investigation (CI) division is a major 

component of our efforts to combat tax-related identity theft. CI investigates and detects tax fraud and other financial fraud, including fraud related to identity theft, 

and coordinates with other IRS divisions to ensure that false refunds involving identity theft are addressed quickly and that the IRS accounts of identity theft victims 

are marked to help prevent any future problems. CI recommends prosecution of refund fraud cases, including cases involving identity theft, to the Department of Justice. 

CI works closely with the other IRS divisions to improve processes and procedures 

related to identity theft refund fraud prevention. For example, CI provides regular 

updates to the IRS’ Wage and Investment division regarding emerging scheme 

trends so that processes and filters can be enhanced to prevent refund loss. These 

9 

collaborative efforts have been instrumental in helping the IRS stop more refund 

fraud. 

In response to this growing threat to tax administration, CI established the Identity Theft Clearinghouse (ITC), a specialized unit that became operational in January, to work on identity theft leads. The ITC receives all refund fraud-related identity theft leads from IRS–CI field offices. The ITC’s primary responsibility is to develop and refer identity theft schemes to the field offices, facilitate discussions between field offices with multi-jurisdictional issues, and provide support to on-going 

criminal investigations involving identity theft. 

CI investigations of tax fraud related to identity theft have increased significantly 

over the past two fiscal years and the trend is continuing in FY 2012. In FY 2011, 

276 investigations were initiated, compared with 224 in FY 2010 and 187 in FY 

2009. CI recommended 218 cases for prosecution in 2011, compared with 147 the 

previous year and 91 in 2009. Indictments in identity-theft related cases totaled 165 

in 2011, with 80 individuals’ sentenced and average time to be served at 44 months. 

This compares with 94 indictments, 45 individuals sentenced and a 41 month average sentence in 2010. 

Already in FY 2012—through May 31—CI has initiated 576 cases and recommended 342 cases for prosecution. Indictments in identity theft cases total 316, 

with 107 individuals sentenced and average time to be served at 49 months. The 

direct investigative time spent on identity theft in FY 2011 was 225,000 hours and 

CI is on pace to double this in FY 2012, as we have already reached 304,053 hours 

through the end of May. 

The IRS conducted a coordinated identity theft enforcement sweep during the 

week of January 23. It was an outstanding success. Working with the Justice Department’s Tax Division and local U.S. Attorneys’ offices, the nationwide effort targeted 105 people in 23 states. The coast-to-coast effort that took place included indictments, arrests and the execution of search warrants involving the potential theft 

of thousands of identities. In all, 939 criminal charges are included in the 69 indictments and information related to identity theft. 

In addition, in that same week IRS auditors and investigators conducted extensive compliance visits to check cashing businesses in nine locations across the country. The approximately 150 visits occurred to help ensure that these check-cashing 

facilities aren’t facilitating refund fraud and identity theft. 

These efforts send an unmistakable message to anyone considering participating 

in a refund fraud scheme that we are aggressively pursuing cases across the nation 

with the Justice Department, and people will be going to jail. 

Identity theft has been designated as a priority in 2012. We also will be piloting 

dedicated cross-functional teams with other parts of the IRS that will allow us to 

create a greater footprint in one or more geographic locales. 

Local law enforcement and other federal agencies play a critical role in combating 

identity theft. Thus, an important part of our effort to stop identity thieves involves 

partnering with law enforcement agencies. We collaborate on these issues and this 

effort will only increase going forward. It should be noted that the existing rules 

for protecting taxpayer privacy often make it difficult for us to provide easy access 

to information that may be useful for local law enforcement. Despite these difficulties, in April 2012 we implemented a new law enforcement assistance pilot program 

designed to aid law enforcement in obtaining tax return data vital to their local efforts in investigating and prosecuting specific cases of identity theft. The IRS will 

carefully assess the results and performance of the pilot program before deciding on 

how to proceed. 

We will continue to search for other innovative ways to partner with local law enforcement. Furthermore, CI special agents throughout the country participate in at 

least 35 task forces and working groups with federal, state, and local law enforcement that target tax-related identity theft crimes. CI personnel also coordinate with 

these agencies in an effort to ensure that victims are aware of the steps they need 

to take to resolve their affected tax accounts. We will continue to develop new partnerships with law enforcement agencies. 

Some of the recent successes involving identity theft include the following cases 

in which sentences were handed down in just the last couple of months: 

• A Florida man was sentenced to 22 years in prison and ordered to pay approximately $3.5 million in restitution on charges that included wire fraud, making 

false statements against the U.S. and aggravated identity theft. This individual 

and four accomplices perpetrated a scheme in which taxpayers’ identities were 

stolen from state databases and used to file hundreds of fraudulent tax returns. 

The four accomplices were sentenced to a total of 117 months in prison and ordered to pay restitution totaling more than $1.6 million. 

10 

• A South Carolina woman was sentenced to 75 months in prison and ordered to 

pay more than $289,000 in restitution after she was convicted on 18 counts of 

filing false, fictitious and fraudulent claims, and one count of aggravated identity theft. This individual, who operated a tax preparation service out of her 

home, filed false returns using identifying information stolen from a former employer, relatives, prisoners and others. She attempted to obtain approximately 

$437,000 in bogus refunds. 

• Three Texas women were sentenced to a total of more than 70 months in prison 

for conspiring over a four-year period to steal taxpayer identities and use the 

information to file false returns and attempt to claim approximately $200,000 

in bogus refunds. These individuals used their positions in Texas state agencies 

governing child support and low-income housing to steal the identities of agency 

clients and claim the false refunds. 

• Two Alabama women were sentenced to 115 months in prison apiece and ordered to pay more than $500,000 in restitution for their involvement in a conspiracy to file false returns using stolen identities. One of these individuals operated a tax return preparation business and prepared the fraudulent returns, 

while the other gathered stolen personal information and also recruited customers, coaching them to provide false information in order to obtain the bogus 

refunds. 

• Five Georgia men were sentenced to a total of more than 280 months in prison 

and ordered to pay a total of more than $3 million in restitution for participating in a scheme in which they prepared more than 150 false tax returns 

using the identifying information of prison inmates or persons living in their 

community. 

• A Tennessee woman was sentenced to 168 months in prison, three years of supervised release, and ordered to pay more than $200,000 in restitution on 

charges that included aggravated identity theft, smuggling and mail fraud. This 

individual and an accomplice filed more than 500 false returns over a threeyear period using stolen identifying information, and she attempted to collect 

more than $2 million in bogus refunds. 

• A Montana man was sentenced to 33 months in prison, three years of supervised release, and ordered to pay more than $85,000 in restitution on charges 

of submitting false claims and identity theft. Over a two-year period this individual filed numerous fraudulent returns using information of deceased taxpayers, and he attempted to obtain more than $125,000 in bogus refunds. 

ASSISTING TAXPAYERS VICTIMIZED BY IDENTITY THEFT

Along with prevention, the other key component of the IRS’ efforts to combat identity theft involves providing assistance to taxpayers whose personal information has 

been stolen and used by a perpetrator in the tax filing process. This situation is 

complicated by the fact that identity theft victims’ data has already been compromised outside the filing process by the time we detect and stop perpetrators from 

using their information. 

We have taken a number of actions, including those described below, to restore 

the account of the innocent taxpayer. We have had difficulty keeping pace with the 

number of cases, but we are determined to bring to bear new resources and streamline existing processes. Thus, we have committed additional resources, even in this 

tough budget climate, trained our people, developed an IP PIN program, and expanded our external outreach. 

Improving our work on Identity Theft Cases 

We realize the importance of resolving cases involving identity theft quickly and 

efficiently so that identity theft victims who are owed their refunds can receive 

them as soon as possible and so that we do not take adverse enforcement actions 

against such individuals. 

We are implementing new procedures designed to resolve cases faster and minimize the disruption to innocent taxpayers. For example, every division within the 

IRS is making identity theft cases a higher priority in their work. As indicated 

above, new procedures and additional staff are being put in place to work cases faster where a refund has been stopped. We increased staffing last year and this year, 

and have plans to dedicate additional resources following the filing season. 

Along with taking steps toward faster resolution of identity theft cases, we are 

continuously improving the way we track and report on the status of all identity 

theft cases. We believe these improvements will reduce the time to work identity 

11 

theft cases in coming filing seasons so that honest taxpayers will receive their refunds sooner. Additionally, better tracking and reporting means that we can spot— 

and correct—any flaws in the system more quickly. 

Identity Protection PIN Program 

In addition to helping identity theft victims clear up problems with their IRS accounts, the IRS works proactively to help ensure that these taxpayers do not encounter delays in processing their future returns. In 2011, we launched a pilot program for Identity Protection Personal Identification Numbers (IP PIN). The IP PIN 

is a unique identifier that establishes that a particular taxpayer is the rightful filer 

of the return. The pilot program showed us that this is a very promising innovation 

that can dramatically reduce the number of taxpayers caught up in delays. Therefore, we have expanded the program for the new filing season, and have issued IP 

PINs to approximately 250,000 taxpayers who have suffered identity theft in the 

past. 

Employee Training 

The IRS runs one of the largest phone centers in the world, and is dedicated to 

providing quality service with a high degree of accuracy to every taxpayer who contacts us. Having said that, we realize that taxpayers who call the IRS with identity 

theft problems present unique challenges to our telephone representatives and we 

need to ensure taxpayers receive quality, courteous service. 

Therefore, last year we conducted a thorough review of the training we provide 

our employees to make sure that they have the tools and sensitivity they need to 

respond in an appropriate manner to those who have been victimized by identity 

theft. As a result, we updated the training course for our telephone assistors to 

maintain the proper level of sensitivity when dealing with identity theft victims, 

and we broadened the scope of our training to include other IRS employees who 

interact with identity theft victims or work identity theft cases. 

Taxpayer Outreach and Education 

The IRS continues to undertake outreach initiatives to provide taxpayers, return 

preparers and other stakeholders with the information they need to prevent tax-related identity theft and, when identity theft does occur, to resolve issues as quickly 

and efficiently as possible. Recent actions in this area include the following: overhauling the identity protection training provided to tax practitioners at last year’s 

Tax Forums; updating the identity theft information provided in the IRS.gov 

website; and continuing a far-reaching communications effort through traditional 

and social media in both English and Spanish, including producing new identity 

theft awareness videos for the IRS YouTube channel in English, Spanish and American Sign Language, and making identity theft the top item in this year’s ‘‘Dirty 

Dozen’’ annual list of taxpayer scams. 

RETURN PREPARER FRAUD

I would like to turn now to the subject of tax return preparer fraud and describe 

for you the efforts that the IRS has made in recent years to ensure a basic competency level for tax return preparers and focus our enforcement efforts on rooting 

out unscrupulous preparers. 

The role of third party assistance in tax preparation in the U.S. has become increasingly important, particularly in light of growing tax law complexity and growing confusion among taxpayers over how to comply with the tax code and meet their 

responsibilities. Today, most federal individual income tax returns are prepared by 

paid return preparers or by taxpayers using consumer tax preparation software. 

The IRS’ Return Preparer Initiative 

As the importance of the practitioner’s role in tax preparation increased, the IRS 

determined that it was necessary to address a gap in oversight involving return preparers who are not certified public accountants (CPAs), enrolled agents (EAs) or attorneys. Our research suggested that our tax system and a large number of taxpayers may be poorly served by some return preparers who engage in fraud. 

It was within this context that the IRS in 2009 launched its Return Preparer Initiative, one of the most important initiatives that the IRS has taken in recent years. 

This initiative has strengthened partnerships with tax practitioners who are already 

regulated and tested, while at the same time ensuring that all return preparers are 

serving taxpayers well. 

In 2009, the IRS launched a six-month review focusing on the competency and 

conduct of paid return preparers. That review spawned a series of recommendations 

to extend oversight to certain areas of the preparer industry to enhance tax compliVerDate Aug 31 2005 13:07 Sep 12, 2012 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6621 H:\WORK\CRIME\062812\74819.000 HJUD1 PsN: DOUGA
12 

ance and service to taxpayers. The IRS began implementing these recommendations 

in 2010 and is now well into the process of putting in place the main components 

of the initiative, which include a registration requirement for preparers, and a competency test and continuing education requirement for preparers who are not CPAs, 

EAs or attorneys. 

Criminal Investigations of Preparers 

About 60 percent of taxpayers use tax professionals to prepare and file their tax 

returns. Most return preparers provide honest service to their clients. But as in any 

other business, there are also some who prey on unsuspecting taxpayers. 

Unfortunately, some unscrupulous return preparers have been known to promise 

clients guaranteed or inflated refunds, skim off part or all of their clients’ refunds, 

or charge inflated fees for return preparation services. Frequently, return preparer 

fraud involves the orchestrated preparation and filing of false income tax returns 

(in either paper or electronic form) which claim inflated personal or business expenses, false deductions, excessive exemptions, and/or unallowable credits that result in a refund. In many instances, the preparers’ clients may not have knowledge 

of the false nature of the entries on their tax returns. 

A new aspect of return preparer fraud is the highjacking of client returns—taking 

personal information of former or potential clients and filing falsified returns when 

the client did not intend for that preparer to submit a return. This may occur in 

instances where the client no longer has a filing requirement, has decided to retain 

a different return preparer or has met with a preparer to obtain an estimate for 

preparation of a return. 

A second new aspect of this type of fraud is participation by return preparers in 

the identity theft schemes initiated by other third-parties. These individuals seek 

out unscrupulous return preparers due to their access to, and familiarity with, the 

IRS’ filing systems. Identity thieves are continually searching for accomplices, either 

to create and file the fraudulent returns or to collect and convert the tax refunds 

into usable forms, i.e. cash or bank accounts they control. Willing return preparers 

that participate in identity theft schemes also offer an important incentive for identity thieves—the ability to commingle fraudulent returns with legitimate ones in 

order to make pattern recognition harder for IRS systems and personnel. 

CI investigations of tax fraud related to return preparer fraud have increased significantly over the past two fiscal years and the trend is continuing in FY 2012. In 

FY 2011, 371 investigations were initiated, compared with 397 in FY 2010 and 224 

in FY 2009. CI recommended 233 cases for prosecution in 2011, compared with 202 

the previous year and 129 in 2009. Indictments in return preparer fraud related 

cases totaled 176 in 2011, with 163 individuals sentenced with an average time to 

be served at 25 months. This compares with 182 indictments, with 132 individuals 

sentenced and a 24-month average sentence in 2010. Already in FY 2012—through 

May 31—CI has initiated 317 cases and recommended 181 cases for prosecution. Indictments in return preparer fraud cases total 149, with 103 individuals sentenced 

and average time to be served at 30 months. 

CONCLUSION

Mr. Chairman, thank you for the opportunity to appear before the Subcommittee 

and describe the steps that the IRS is taking to prevent identity theft and assist 

taxpayers who have been victims of this crime, and to discuss the actions we have 

been taking in the area of return preparer fraud. These two areas are major challenges for the IRS, and, while we have had some success of late, we are committed 

to improving our efforts in regard to both. The Criminal Investigation division has 

played and continues to play a key role in our efforts both on identity theft and return preparer fraud. We will continue to be aggressive in investigating fraud 

schemes perpetrated by identity thieves and unscrupulous preparers. We want to 

make certain that the message gets through that those participating in such 

schemes do so at their peril, because we will do everything we can to make sure 

that they are caught and sent to jail. I would be happy to answer any questions 

that you may have. 

Mr. GOHMERT. Thank you so much, Ms. Sparkman. We appreciate that. 

And there will be questions, but next, we will hear from Ms. 

Nina Olson is the head of the Taxpayer Advocate Service. Ms. Nina 

Olson serves as an advocate for taxpayers within the IRS. Prior to 

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her appointment as the national taxpayer advocate in January 

2001, Ms. Olson maintained a private law practice, concentrating 

in tax controversy representation. 

She was the founder and Executive Director of the Community 

Tax Law Project, the first independent low-income taxpayer clinic 

in the United States. From 1975 until 1991, she owned and operated Accounting, Tax, and Information Services, a tax planning and 

preparation firm in Chapel Hill, North Carolina. 

Ms. Olson served as the chair of both the American Bar Association Section on Taxation and Low-Income Taxpayers Committee 

and the pro se, pro bono task force of the ABA Section of Taxation’s 

Court Procedure Committee. 

Ms. Olson graduated from Bryn Mawr College with an AB in fine 

arts. She received her J.D. from North Carolina Central School of 

law and her master’s of law in taxation from the Georgetown University Law Center. 

Ms. Olson has served as an adjunct professor at several law 

schools, and we are honored and proud to have you here, Ms. 

Olson. We would ask that you proceed with your 5 minutes of testimony. 

TESTIMONY OF NINA E. OLSON, UNITED STATES TAXPAYER 

ADVOCATE, OFFICE OF THE TAXPAYER ADVOCATE, INTERNAL REVENUE SERVICE 

Ms. OLSON. Thank you. Thank you for inviting me today to testify about tax-related identity theft and refund fraud. 

Since 2004, I have written extensively about the impact of these 

crimes on taxpayers and tax administration, and I have worked 

closely with the IRS to improve its efforts to assist taxpayer victims. The IRS has adopted many of my office’s recommendations 

and made significant progress in this area, but significant challenges also remain. 

I will highlight five points that I think deserve particular emphasis. First, I am concerned that the Federal Government continues 

to facilitate tax-related identity theft by making public the Death 

Master File, a list of recently deceased individuals that includes 

their full name, Social Security number, date of birth, date of 

death, and the county, State, and zip code of the last address on 

record. 

There is some uncertainty about whether the Social Security Administration has the legal authority to restrict public access to 

DMF records in light of the Freedom of Information Act. For that 

reason, I strongly support legislation to restrict public access to the 

DMF. 

However, I believe the SSA has at least a reasonable basis for 

seeking to limit public access to the DMF, and if legislation is not 

enacted, I encourage the SSA to act on its own. The longer we 

delay, the more taxpayers are harmed. 

Second, I am aware that some State and local law enforcement 

agencies would like access to tax return information to help them 

combat identity theft. I have significant concerns about loosening 

taxpayer privacy protections and believe this is an area where we 

need to tread carefully. 

14 

But as I describe in my written statement, the IRS is piloting a 

procedure that would enable taxpayers to consent to the release of 

their returns in appropriate circumstances to these agencies. In my 

view, giving taxpayers a choice strikes the appropriate balance. 

Third, unscrupulous preparers sometimes alter taxpayers’ returns by inflating income, deductions, credits, or withholding without their clients’ knowledge or consent and pocket the difference 

between the revised refund amount and the amount expected by 

the taxpayer. The taxpayer learns about this fraud when the IRS 

contacts him or her to collect the improperly paid out refund 

amount. 

Nine years ago, IRS chief counsel advised the IRS that it must 

remove the liability from the taxpayer victims’ accounts. Yet as recently as January of this year, the IRS had no procedures to make 

the taxpayer whole. Only yesterday did the IRS issue partial interim guidance to its employees on this matter after I personally 

issued taxpayer assistance orders, taxpayer advocate directives to 

the highest levels of the organization, and covered the issue in the 

annual reports to Congress and in congressional testimony. 

The taxpayers are the victims here, and the IRS has let them 

down for almost a decade. This is unacceptable. 

Fourth, unscrupulous tax return preparers sometimes change the 

routing number on a taxpayer’s return in an attempt to misappropriate the direct deposit refund. When this occurs, the IRS’s position is that because it paid out the refund according to the instructions it received on the return, the taxpayer’s sole recourse is to 

pursue the matter in a civil lawsuit against the return preparer. 

But if the taxpayer had requested a paper refund check that was 

stolen, the Treasury Department could issue a replacement check 

after verifying the theft. I encourage Congress to modify the statute authorizing payments from the Check Forgery Insurance Fund 

to expressly include direct deposits and other electronic transactions. 

That said, I don’t think the IRS needs to wait for legislation before helping these tax fraud victims. In the case of a stolen direct 

deposit, the IRS chief counsel has advised that the service is legally 

permitted to reissue the refund to the taxpayer and that a return 

with tax data wrongfully altered by a preparer is not valid. 

I do not think it is too much of a stretch for the IRS to treat a 

return with an account number wrongfully altered by a preparer 

as invalid. 

Fifth, there is an inherent conflict between the need to protect 

the public fisc from refund fraud and taxpayers’ expectation and 

need to receive their refunds quickly. We can either delay issuance 

of refunds until IRS has reviewed all 110 million refund returns, 

or we can accept that some dollars will be paid to persons committing refund fraud. 

Alternatively, the IRS will need considerably larger staff to enable it to review questionable returns more quickly. There is no 

way around these tradeoffs. 

Thank you for the opportunity to testify today. 

[The prepared statement of Ms. Olson follows:] 

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Mr. GOHMERT. Thank you very much. 

We certainly appreciate your testimony and your insights. You 

have certainly been in a position to observe things from both sides 

of these issues. 


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At this time, we will hear from Mr. Sanford Zinman, who is a 

CPA, president of Sanford E. Zinman, CPA, PC, located in White 

Plains, New York. 

Mr. Zinman started his own practice in 1983. He has been in 

public accounting for more than 30 years and has expertise in compilations and tax. He is a member of the American Institute of Certified Public Accountants and the National Conference of CPA 

Practitioners. 

He serves as the president of the Westchester/Rockland Chapter 

of the National Conference of CPA Practitioners and is chair of the 

Tax Committee for this organization. Mr. Zinman is a graduate of 

Iona College with a master of business administration in public accounting. 

Mr. Zinman, you are recognized for 5 minutes. 

TESTIMONY OF SANFORD ZINMAN, NATIONAL TAX CHAIR, 

NATIONAL CONFERENCE OF CPA PRACTITIONERS (NCCPAP) 

Mr. ZINMAN. Mr. Chairman and Members of the Subcommittee, 

thank you for inviting me to testify today. 

The National Conference of CPA Practitioners, NCCPAP, serves 

more than 500,000 businesses and individual clients. I personally 

regularly prepare several hundred income tax returns for clients 

throughout the country during any given year, and I am in the 

trenches with my clients, discussing their tax, financial, and personal issues. 

The National Taxpayer Advocate’s Office has reported a growth 

in identity theft in relation to tax refund fraud. The Identity Protection Specialization Unit, which was created by the IRS in 2008, 

has seen a continuously increasing number of cases reported to the 

IRS since the inception of the unit. 

In fiscal year 2009, there were a total of 80,637 cases. This increased to 184,839 cases in 2010 and 226,356 cases in 2011. This 

is an increase in over 280 percent in just 2 years. 

The real issue is what identity theft does to the individuals and 

what can be done to combat the problem. It is reasonable to presume that every American has either been personally affected by 

identity theft or has known someone who has been a victim. This 

is a good definition of an epidemic. 

Identity theft can destroy a person’s life. It can prevent them 

from buying a car or a house, getting a credit card, or even having 

a bank account. It can hamper someone’s ability to get a job. The 

problem of identity theft will not go away. The issue is how can we 

protect our citizens in an efficient, cost-effective manner, and what 

is the Government’s role in this matter? 

As I prepared today’s testimony, I decided to poll the NCCPAP 

membership about their experience with identity theft. We sent an 

email blast Monday morning asking, ‘‘Have you personally or professionally experienced or witnessed an identity theft situation 

within the past 2 years?’’ We requested a yes or a no response. 

Within 2 days, I received responses from in excess of 25 percent 

of our members. And more than two-thirds of the responses were 

yes. 

If I can extrapolate on this, that means that in excess of 335,000 

of our clients have experienced or witnessed some form of identity 

45 

theft within the past 2 years. Additionally, many of the responses 

included that they had witnessed several cases of identity theft. 

The Internal Revenue Service has, for many years, recognized 

the serious issue of identity theft and has instituted measures to 

combat identity theft and continues to do so. However, many of the 

IRS fixes can be cumbersome and time consuming. 

The GAO has indicated that the quality of customer service at 

the IRS has declined noticeably because of budget cuts over the 

past year. The IRS was hit with a 2.5 percent budget cut in 2012, 

with many cuts to the enforcements and operations support. Cuts 

took the form of elimination of 3.1 percent of its full-time employees through attrition, hiring freeze, and targeted buyouts of more 

than 900 workers. 

NCCPAP has strongly—is a strong supporter of identity protection and has been for many years. We spearheaded the PTIN registration for tax preparers and have partnered with the IRS in the 

registration of all tax preparers. 

NCCPAP has recommended that full Social Security numbers be 

redacted from documents which are mailed to taxpayers. We also 

recommend that Social Security numbers be removed from client 

copies of tax returns that are e-filed. 

Additionally, NCCPAP recommends a dedicated IRS Form 14039 

Identity Theft Affidavit fax line for victims of identity theft to 

speed up the notification process and provide an additional level of 

security. We also recommend that some form of positive acknowledgments be sent to the individual within 48 hours to provide an 

additional level of assurance that the problem is being addressed. 

NCCPAP also supports H.R. 4362, the Stop Identity Theft Act of 

2012, and we thank Chairman Smith for being a cosponsor. This 

uses Department of Justice resources with regard to tax identity 

theft. We agree with the concept that no one agency or department 

can mitigate the problem alone. The problem is too pervasive. 

We support the concept of the Justice Department working with 

the Treasury Department. We also support the concept that the 

Federal Government reach out to State governments to attack the 

problem of identity theft. 

Thank you. 

[The prepared statement of Mr. Zinman follows:] 

Prepared Statement of Sanford Zinman, 

National Tax Chair, National Conference of CPA Practitioners 

Mr. Chairman and members of the Committee, thank you for inviting me to testify today. My name is Sanford Zinman. I am a Certified Public Accountant, member of the American Institute of CPA’s and am currently the National Tax Policy 

Chair of the National Conference of CPA Practitioners, (NCCPAP), as well as the 

President of the Westchester/Rockland New York Chapter of NCCPAP. NCCPAP is 

a professional organization that advocates on issues that affect Certified Public Accountants in public practice and their small business and individual clients located 

throughout the United States. NCCPAP members serve more than 500,000 businesses and individual clients and are in continual communication with regulatory 

bodies to keep them apprised of the needs of the local CPA practitioner. 

I am the sole owner of a CPA firm in White Plains, New York which I started 

approximately 30 years ago. I have been preparing individual and small business 

tax returns as well as sales tax and payroll tax returns for over 35 years. I regularly 

prepare several hundred income tax returns during any given year and am in the 

trenches with my clients discussing their tax, financial and personal issues and the 

impact of events on them. Although my clients are mostly in the New York, New 

Jersey and Connecticut area I have many clients in Florida, Alabama, California, 

46 

Massachusetts, Nebraska, Tennessee and Washington DC. In this respect my practice is the same as many members of NCCPAP and other CPA firms throughout the 

United States. 

According to the Javelin Strategy & Research 2011 Survey Report, the number 

of US adult victims of identity fraud decreased from 10.1 million in 2003 to 9.3 million in 2005 and 8.4 million in 2007. The total one year fraud amount decreased 

from $55.7 billion in 2006 to $49.3 billion in 2007. There are numerous reasons for 

these decreases. Much of the change can be attributed to the Identity Theft and Assumption Deterrence Act of 1998. However identity fraud increased by 13% in from 

2010 to 2011 when more than 11.6 million adults were victims. Approximately 1.4 

million more adults were victimized by identity fraud in 2011, compared to 2010. 

Much of the increase in identity theft can be attributed to social media and mobile 

phone behaviors as consumers are still sharing a significant amount of personal information. 

The National Taxpayer Advocate’s office has also reported growth in identity theft 

in relation to tax refund fraud. The Identity Protection Specialized Unit (IPSU) 

which was created by the IRS in 2008 has seen a continuous increase in the number 

of cases reported to the IRS since the inception of the unit. In Fiscal Year 2009, 

IPSU had a total of 80,637 cases. In Fiscal Year 2010, this increased to 184,839 

cases, and in Fiscal Year 2011, 226,356 cases. This is an increase of over 280% in 

just two years. 

My testimony provides data of which, I am certain, you are already aware. However, the real issue is what identity theft does to individuals and what can be done 

to combat the problem. It is reasonable to presume that every American has either 

been personally affected by identity theft or has known someone who has been a 

victim. This is a good definition of an epidemic. Identity theft can destroy a person’s 

life. It can prevent them from buying a house or a car, getting a credit card or even 

having a bank account. It can even hamper someone’s ability to get a job. The problem of identity theft will not go away. Attached are a few examples of identity theft 

problems that have been witnessed and can be shared. The issue is, how can we 

protect our citizens in an efficient, cost effective manner and what is the government’s role in the matter. 

During the week of January 23, 2012 the Internal Revenue Service and the Justice Department engaged in a massive national sweep to crack down on suspected 

identity theft perpetrators as part of a stepped-up effort against refund fraud and 

identity theft. Working with the Justice Department’s Tax Division and local U.S. 

Attorneys’ offices, the nationwide effort targeted 105 people in 23 states. The coastto-coast effort included indictments, arrests and the execution of search warrants involving the potential theft of thousands of identities and taxpayer refunds. In all, 

939 criminal charges were included in the 69 indictments and information related 

to identity theft. In addition, IRS auditors and investigators conducted extensive 

compliance visits to money service businesses in nine locations across the country. 

Approximately 150 site visits occurred to help ensure these check-cashing facilities 

were not facilitating refund fraud and identity theft. This national effort was part 

of a comprehensive identity theft strategy the IRS has embarked on that is focused 

on preventing, detecting and resolving identity theft cases as soon as possible. In 

addition to the law-enforcement crackdown, the IRS has stepped up its internal reviews to spot false tax returns before tax refunds are issued as well as working to 

help victims of the identity theft refund schemes. To help taxpayers, the IRS created 

a new, special section on the IRS website (www.IRS.gov) dedicated to identity theft 

matters, including YouTube videos, tips for taxpayers and a special guide to assistance. The information includes how to contact the IRS Identity Protection Specialized Unit and tips to protect against ‘‘phishing’’ schemes that can lead to identity 

theft. The IRS recommended that a taxpayer who believes they are at risk of identity theft due to lost or stolen personal information should contact the IRS immediately so the agency can take action to secure their tax account. The taxpayer 

should contact the IRS Identity Protection Specialized Unit. The taxpayer will then 

be asked to complete the IRS Identity Theft Affidavit, and ‘‘follow the instructions 

on the back of the form based on their situation’’. 

The Internal Revenue Service has, for many years, recognized the serious issue 

of identity theft and has instituted measures to combat identity theft and continues 

to do so. However, many of the IRS ‘‘fixes’’ can be cumbersome and time consuming. 

Beginning in 2008 the IRS implemented Service-wide identity theft indicators which 

are placed on a taxpayer’s account if the taxpayer claimed they were a victim of 

identity theft. But these indicators are implemented only after the taxpayer contacts 

the Service with certain required substantiation documentation. The IRS can then 

issue an ‘‘Identity Protection PIN’’ which allows the legitimate taxpayer’s return to 

bypass the identity theft filters. In mid-November 2011 selected taxpayers received 

47 

an IP PIN Notice letter notifying them that they would be receiving an IP PIN for 

use when filing their 2011 return. In mid-December 2011 these taxpayers received 

a second letter with their IP PIN which was a single-use 6 digit PIN. Some of these 

letters caused confusion when returns were filed partly because the program was 

so new. Some letters were lost which caused problems with filing returns. Some taxpayers forgot to tell their preparers that they received a letter with an IP PIN. 

Since this was a limited program the negative impact was very limited. Obviously, 

better communication could result in better outcomes. 

In its final report issued on May 3, 2012 The Treasury Inspector General for Tax 

Administration (TIGTA) indicated that The Federal Trade Commission reported 

that identity theft was the number one complaint in calendar year 2011, and government documents/benefits fraud was the most common form of reported identity 

theft. As of December 31, 2011, the IRS’s Incident Tracking Statistics Report 

showed that 641,052 taxpayers were affected by identity theft in calendar year 2011 

versus 270,518 in 2010—a 137% increase. The TIGTA report concluded that the IRS 

is not effectively providing assistance to victims of identity theft, and current processes are not adequate to communicate identity theft procedures to taxpayers, resulting in increased burden for victims of identity theft. TIGTA found that Identity 

theft cases are not worked in a timely manner and some cases can take more than 

a year to resolve. Sometimes communications between the IRS and identity theft 

victims is limited and confusing, and some victims are asked multiple times to substantiate their identity. 

TIGTA recommended that the IRS: 1) establish accountability for the Identity 

Theft Program; 2) implement a process to ensure that IRS notices and correspondence are not sent to the address listed on the identity thief’s tax return; 3) conduct 

an analysis of the letters sent to taxpayers regarding identity theft; 4) ensure taxpayers are notified when the IRS has received their identifying documents; 5) create 

a specialized unit in the Accounts Management function to exclusively work identity 

theft cases; 6) ensure all quality review systems used by IRS functions and offices 

working identity theft cases are revised to select a representative sample of identity 

theft cases; 7) revise procedures for the 

Correspondence Imaging System screening process; and 8) ensure programming is 

adjusted so that identity theft issues can be tracked and analyzed for trends and 

patterns. 

The Government Accountability Office (GAO) indicated, in a report issued on June 

8, 2012 that the quality of customer service at the IRS has declined noticeably because of budget cuts over the past year and may get worse as the agency is tasked 

with additional implementation work related to the health care overhaul. The IRS 

was hit with a 2.5 percent budget cut in fiscal year 2012, with cuts mainly to Enforcement and Operations Support. The cuts took the form of the elimination of 3.1 

percent of its full-time employees through attrition, a hiring freeze, and targeted 

buyouts of more than 900 workers. GAO said data from the Congressional Budget 

Office justification for the IRS’s budget fiscal year 2013 budget request shows that 

the percentage of phone calls that reach IRS customer service representatives is expected to have fallen to 61 percent in fiscal year 2012, down from 70.1 percent in 

fiscal year 2011. 

It is important that the Treasury and Justice Departments work hand-in-hand to 

deter identity theft, and impose the severest penalty possible on those who commit 

it. 

As identity theft increases, this also places an additional burden on the tax return 

preparers. Preparers often find out about identity theft issues after they are authorized to submit a tax return electronically. This only happens after the tax return 

is prepared, printed and mailed to the taxpayer, and the taxpayer has authorized 

the electronic submission of the return. On some occasions the delay between the 

original e-file submission and when the return finally gets filed can affect the taxpayer. States must also be made aware of identity theft problems. In New York a 

taxpayer’s name, address, social security number and birth date are indicated on 

the tax return. Client copies of returns are mailed to clients for approval. A thief, 

armed with this information could do irreparable harm. 

NCCPAP has been a strong supporter of identity protection for any years. We 

spearheaded the PTIN regulations for tax preparers to safeguard the preparer’s social security number and have partnered with the IRS in the registration of all tax 

preparers to reduce the number of unscrupulous preparers who try to take advantage of the IRS modernized e-file system. NCCPAP has recommended that full social 

security numbers be redacted from documents (such as Form 1099R, 1099 DIV and 

1099 INT) which are mailed to taxpayers. We also recommend that social security 

numbers be removed from client copies of tax returns that are e-filed. Additionally 

NCCPAP recommends a dedicated IRS Form 14039 (Identity Theft Affidavit) fax line 

48 

for victims of identity theft. This would speed up the notification process and would 

also provide an additional level of security compared with the present system of 

mailing documentation to the IRS. NCCPAP also strongly supports H.R. 4362, the 

STOP Identity Theft Act of 2012 which uses Department of Justice resources with 

regard to tax return identity theft. We agree with the concept that no one agency 

or department can mitigate the problem alone. The problem is too pervasive. We 

support the concept of the Justice Department working with the Treasury Department. We also support the concept that the federal government reach out to the 

state governments to attack the problem of identity theft. 

Addendum 

Example 1: 

I prepare approximately 300 individual returns per year. In the last two years I 

have had three clients experience Identity theft issues, one in 2010 and two in 2011. 

Two of the cases involved surviving spouses. 

The 2010 incident involved a doctor client who was rejected when we tried to electronically file his return. We filed it before April 15 on paper per the instructions. 

The client called me the end of May asking where his refund was. About a week 

later the taxpayer called me back and informed me that he had received written 

communications from the IRS at his summer residence on Cape Cod (an address 

never given to the IRS). We finally resolved the issue and secured the client’s refund 

with the help of IRS Taxpayer’s Assistance office. 

There were two instances of identity theft this past tax season; one was a similar 

situation with a surviving spouse being rejected when we tried to e-file his return. 

The other situation involved a taxpayer who received a letter from the IRS stating 

the refund would be held up for standard identity check. The client’s return is on 

extension and has not been filed yet. In both cases we have filed the proper documentation but no resolution has been reached. 

Example 2: 

Two separate incidents. The first; I received an e-file rejection for a taxpayer due 

to a possible identity theft issue. Taxpayer called the IRS numerous times and (according to the taxpayer) got different answers each time. We finally had to submit 

on paper. The second; I received an e-file rejection indicating that the taxpayer was 

deceased. I called the taxpayer who told me he received some notification from the 

IRS but thought he lost it. He found the IP PIN and we were able to file the return. 

Example 3: 

Client is a single mom with two elementary school children. One child’s social security number was compromised. Neither the parent nor I were aware of this. The 

IRS never sent the taxpayer a notification. After the e-file was rejected we filed on 

paper and the refund (in excess of $4,000.00) took nine weeks to be received. 

Example 4: 

A taxpayer sent me her tax information in early April. We prepared the return 

and sent the documents to the taxpayer. We received the authorizations to e-file and 

did so only to have the return rejected. Neither the taxpayer nor I were able to determine from the IRS the origin of the problem for several days. We paper filed the 

return and then found out that someone else had e-filed using the taxpayer’s social 

security number. 

Mr. GOHMERT. Thank you, Mr. Zinman. 

Mr. Michael Robinson is a lifelong resident of the Norfolk, Virginia, area; been employed by the City of Norfolk for the past 10 

years; and is currently a water treatment plant operator’s assistant. Mr. Robinson is here to testify today about his experience with 

Mo’ Money Taxes. 

The witnesses’ written statements of all of you, as I mentioned 

earlier, will be entered and be part of the record, and we appreciate 

your staying with the 5-minute limit. 

Mr. SCOTT. Mr. Chairman? 

49 

Mr. GOHMERT. Yes. 

Mr. SCOTT. Could I say a word about Mr. Robinson? 

Mr. GOHMERT. Yes, certainly. 

Mr. SCOTT. He has made quite an effort to get here. His original 

transportation plans got disrupted, and he made a yeoman’s effort 

to get here, and we appreciate his presence. 

Mr. GOHMERT. Mr. Robinson, it is not like you don’t know frustration and anxiety, and we are sorry if there has been any today 

in getting you here. But we appreciate your efforts. 

At this time, we give you 5 minutes to provide your testimony. 

Thank you. 

TESTIMONY OF MICHAEL ROBINSON, 

VICTIM OF INCOME TAX PREPARATION FRAUD 

Mr. ROBINSON. Good morning, everybody, ladies and gentlemen. 

[Pause.] 

Mr. ROBINSON. Good morning, everybody, ladies and gentlemen. 

My name is Michael Robinson. I am from the City of Norfolk. I 

work for the water treatment plant, Moores Bridges water treatment plant. 

I went—I learned about—— 

Mr. CONYERS. Pull that a little closer to you, sir, the microphone, 

so that everybody can hear you clearly. Pull that up there. 

Thank you, sir. 

Mr. ROBINSON. I learned about Mo’ Money Taxes through my 

family members—my daughter, my brother, his wife. They all filed 

through them. They were telling me to go to them for get extra 

money. 

So I went there to get an estimate, and when I did get an estimate, me and my wife sat down. My daughter introduced me to a 

guy named Red, a young gentleman that were filing taxes for Mo’ 

Money. 

We sat down. He got on the computer. I gave him my ID and a 

check stub. He did his figures on a computer. He got up, went and 

talked to another gentleman. He came back. He gave me the estimate, turned the monitor screen toward me, and showed me that 

I could get back $3,602. 

So I looked at my wife. Me and my wife, we wasn’t like—I told 

him we weren’t going to file. I would just let him know if I was 

satisfied, I would get back with him later. So we got up, we left. 

I would say about after—about a month later, I got my tax return 

from my job, the W-2s, at the end of January. I filed in March. 

I went to Jackson Hewitt, where I usually go at. I went, me and 

my wife sat down. Well, first, I called the lady, Ms. Caroline, seeing 

we had set an appointment. Then we got our taxes done. And we 

signed those. We got our taxes done. 

But the next day, Jackson Hewitt called me, Miss Caroline called 

me and told me about a problem. And I was like ‘‘a problem?’’ So 

I told her I would come there after I get off work. 

Then when I got off work, she exposed me that I had been filed. 

And I was like, ‘‘I didn’t file.’’ She said, ‘‘You have already been 

filed through Mo’ Money Taxes.’’ I said, ‘‘I didn’t file with Mo’ 

Money.’’ 

50 

So she called IRS. When IRS came, she answered the phone, Ms. 

Wade, Ms. Caroline, both—all three us was talking. We had Ms. 

Wade on the intercom, and we were talking about what had happened. 

So I explained to them that I had never filed. I never signed no 

papers. They did it without me knowing. So she was doing something, reading something and found out in the computer that they 

sent me a check for $5,270, and I was like—I was in shock because 

I know I haven’t received nothing. And she asked me did I receive 

a check or anything? I was like ‘‘not one brown penny.’’ 

So me and my wife was looking. And Miss Caroline asking me 

if we would sign some papers about some complaint about Mo’ 

Money for using my name. So as we are sitting there, Ms. Wade 

informed me that they—again, she asked me did I receive any 

money? I said, ‘‘No, ma’am. I know nothing about it. Never received 

nothing.’’ 

So they did a little—opened up a little investigation of their own, 

Ms. Caroline and Ms. Wade, and they found out that Mo’ Money 

had—the guy that filed my taxes name, Red, he didn’t use his first, 

his real name. He had ‘‘Tristan something’’ on the paper that Ms. 

Wade found out that it was a female that filed, instead of him. He 

used the Social Security number that led to being a female. 

When he turned the screen to me, it was $3,600. But whatever 

he done, whatever he did to get it up to $5,000, the IRS sent me 

a check for $5,270 was different from what he showed me on the 

TV screen. 

And we both, me and my wife, were sitting there, and the lady 

was like—Ms. Wade told us that she was going to fax some papers, 

and they are going to open up an investigation. So she faxed that 

to Jackson Hewitt. We signed papers. They launched the investigation, and I did a bunch of paperwork, had the transcript from Mo’ 

Money Taxes that I will file as a full-time student, college student. 

And that was from that. 

[The prepared statement of Mr. Robinson follows:] 

51 

Mr. GOHMERT. We are going to have an opportunity for questions, and appreciate your testimony, Mr. Robinson. Obviously, you 

have been through quite an ordeal already. 

I will utilize Chairman’s prerogative and reserve my questioning. 

At this time, I yield to the Ranking Member, Mr. Scott, for 5 minutes. 

Mr. SCOTT. Thank you. 

Mr. Robinson, have you gotten your refund check yet? 

Mr. ROBINSON. No, sir. 

Mr. SCOTT. You still haven’t gotten your refund check? 


MR.eps
52 

Mr. ROBINSON. No. I filed the amended. I filed the amended 

after—— 

Mr. SCOTT. You filed with Jackson Hewitt, right? 

Mr. ROBINSON. Yes, sir. 

Mr. SCOTT. And then they wrote back, said, well, you already 

filed? 

Mr. ROBINSON. Right. 

Mr. SCOTT. Okay. And so, they are still working on it, and you 

haven’t gotten your refund? 

Mr. ROBINSON. I haven’t received anything yet. But it is supposed to be coming in like a 12-week span because I filed the 

amended. 

Mr. SCOTT. Okay. Ms. Sparkman, what is the Federal Government doing in response to the situation with Mo’ Money Taxes that 

Mr. Robinson has articulated? 

Ms. SPARKMAN. Thank you, Mr. Chairman. 

That is a great question, and I apologize that I cannot speak directly about anything that may be ongoing. But let me tell you 

that, first of all, I think it is a travesty that we have victims in 

these types of cases. I will tell you that Criminal Investigation is 

actively pursuing criminal investigations of perpetrators of these 

types of crimes because nobody should be victimized. 

We have similar cases across the country where we have actively 

gone after return preparers who are victimizing victims by stealing 

their identity and getting the money for themselves. We will continue to do that actively across the Nation and put these people in 

jail. 

Also, for Mr. Robinson, we have a victim assistance program. He 

would file an affidavit—it sounds like Mr. Robinson did do that— 

so that we could tell that he is the true taxpayer. Then we could 

make him whole on his tax return. The IRS marks his account so 

that in future years, we can protect him against being further victimized by an individual that may have already victimized him before or somebody else who may have gotten his identification. 

Mr. SCOTT. And what does the victim advocate do? 

Ms. SPARKMAN. I am sorry? 

Mr. SCOTT. The IRS has a victim assistance program. When he 

files his affidavit, what do they do? 

Ms. SPARKMAN. Yes, sir. I am from the Criminal Investigation; 

I don’t have all of the specifics, but I understand that my colleagues have an active victim assistance program. They look 

through and ensure which identify is the correct return because we 

do have to make sure we know who the correct taxpayer is. 

Once that is done, I understand that they mark the account appropriately and make sure that the victim is made whole. Their legitimate return is filed, it is processed and they receive their refund. The information from the bad guy who filed the return is 

sent to Criminal Investigation to see if we can work a criminal investigation on that matter or if that individual or that unscrupulous preparer is doing it for others. 

Mr. SCOTT. Well, if somebody cashes a fraudulent check, what 

happens? 

Ms. SPARKMAN. If—— 

53 

Mr. SCOTT. And in this case, the check from—the check was 

cashed apparently by Mo’ Money. 

Ms. SPARKMAN. Okay. 

Mr. SCOTT. In general, and I know you can’t talk about a specific 

case. In general, if you catch somebody cashing a check illegally, 

do you just stop payment on the check? Do you just write it off? 

Or do you actually pursue aggressively the criminal act? 

Ms. SPARKMAN. I don’t know the specifics in this case, of course. 

But generally, it is illegal for someone to take a check that is not 

theirs, that they have no right to, and cash that check. 

They would be committing a crime at that point. Whether that 

is cashed or not, it depends on the facts and circumstances of that 

particular situation. 

Mr. SCOTT. Well, I mean, do you have enough staff to actually 

pursue people that you have found to have illegally cashed checks? 

Ms. SPARKMAN. Yes, sir. We do. Because we find that many times 

these unscrupulous preparers have partners in their conspiracies 

who also cash the checks for them. Those check cashers we would 

also pursue criminally for that crime. 

Mr. SCOTT. Ms. Olson, what has been your experience when people run into these kind of problems? 

Ms. OLSON. As I noted in my testimony, if there is a paper check 

that has been forged, there is a process that the taxpayer has to 

submit to Treasury, to the Financial Management Service, three 

copies of their signature, you know, checks that are with their signature. And then FMS will compare that to the check that—the 

signature that is on the back of the check, and then they can pay 

out the proceeds to the taxpayer from this special fund. 

But if the money went to a direct deposit account, and most of 

these thieves really like direct deposit, there is no procedure. The 

IRS says you have to go against Mo’ Money or whomever and try 

to get the money back from them. 

Mr. SCOTT. Well, if it is a paper check, does the Government take 

criminal action against those who are cashing the checks? 

Ms. OLSON. If it is a large scheme, then it will convince CI to 

make the referral to Department of Justice and pursue it. If it is, 

you know, a small number of people, I think it is highly unlikely 

because it is a very expensive thing to bring those prosecutions. 

Mr. SCOTT. Mr. Chairman, I want to point out that Mr. Robinson 

went into this Mo’ Money Taxes and felt something unscrupulous 

was going on and had the intelligence to just walk out and go to 

someone who is a legitimate preparer. 

So I want to thank you. And if others had done the same thing, 

we wouldn’t have as much problem as we have now. 

Mr. GOHMERT. Thank you, Mr. Scott. 

And you are right. But obviously, some of these people don’t 

exude the fraudulent intent that Mr. Robinson was able to pick up, 

and they aren’t—don’t know to walk out. And even as wise as Mr. 

Robinson acted, obviously, they still got to him. 

But at this time, I would like to yield to the former Chairman 

of the full Committee, Mr. Conyers, for 5 minutes. 

Mr. CONYERS. Thank you, Judge Poe. 

Nobody has mentioned the whole question of the SmithWasserman Schultz bill about including identity theft. Is it because 

54 

you don’t know anything about it, or you don’t think it is related 

to this, Ms. Olson? 

Ms. OLSON. In my written testimony, we thought that it was— 

we were very supportive of it. And I do think that it is going to 

take a combination of approaches, and increasing the recognition, 

both legally and publicly of identity theft, as a crime is going to 

help. 

So I think that this bill is a help. However, as long as people can 

continue to ping our computers, something will come through, and 

I think it is a combination of us also developing better screens and 

developing better processes to help the victims to really address 

this crime. 

Mr. CONYERS. No question that one bill alone isn’t going to solve 

this, and you identified a number of improvements that can be 

made, and I congratulate you on that. 

Ms. Sparkman, where do you come out on the legislation that 

would include identity theft like the Wasserman Schultz-Chairman 

Smith idea? 

Ms. SPARKMAN. Thank you, Mr. Conyers. 

Yes, I would have to work with my folks at tax policy, at the 

Treasury Department, and with the IRS to look at the specific legislation. But I will say that I appreciate the support of law enforcement. I will tell you that criminal investigation, along with bringing tax charges of false claims, 287 false claims, we are also actively charging identity theft in these types of cases. 

And in fact, we are able to—— 

Mr. CONYERS. Okay. While you are at it, how many people have 

been prosecuted and convicted for all this theft and false activity 

having to do with filing tax claims? You keep talking about it, but 

I don’t get any numbers. Do you have them, or can you get them? 

Ms. SPARKMAN. I can certainly get those for you, Mr. Conyers, if 

I may take that back? But I can tell you that this year alone, we 

have already brought 300 indictments, that those are charges—— 

Mr. CONYERS. That is good. 

Ms. SPARKMAN [continuing]. On these folks. 

Mr. CONYERS. All right. Good start. 

Now what are we—Ms. Olson, Ms. Sparkman, what are we doing 

about Mo’ Money? We have got a witness here that has been totally 

ripped off. It leads me to believe that there are more around. We 

have got a few complaints from the Michigan attorney general 

about Mo’ Money. 

What is going on? 

Ms. OLSON. Congressman Conyers, my office was approached by 

the Illinois attorney general’s office to help them. They were taking 

action against Mo’ Money, and they wanted to be able to put information out about the services that my office could provide and how 

victims could get help from the IRS. 

And we have worked with them. We are both taking cases in and 

trying to get those cases, such as Mr. Robinson’s, straightened out. 

And we would offer our office’s assistance to any—to partner with 

any attorney general, State attorney general’s office, including 

Michigan. 

You know, I can’t speak about the specific cases. But my local 

taxpayer advocates have been seeing these kinds of patterns of beVerDate Aug 31 2005 13:07 Sep 12, 2012 Jkt 000000 PO 00000 Frm 00058 Fmt 6633 Sfmt 6601 H:\WORK\CRIME\062812\74819.000 HJUD1 PsN: DOUGA
55 

havior for several years now, and we do work closely with Criminal 

Investigation to identify them and let them know about them when 

we—— 

Mr. CONYERS. Got any numbers that you can—— 

Ms. OLSON. I do. I think we, to date—it is in my written testimony. But I think it is about 96 cases so far just from Illinois. 

Mr. CONYERS. Okay. 

Ms. OLSON. And that has been a couple of months. 

Mr. CONYERS. Okay. Now at the table yards away is a classic— 

I mean, this is a textbook rip-off that Michael Robinson has reported to you. Can’t we get on—I got two officials from IRS here 

and a classic victim. Can’t we do something with Robinson immediately? 

Ms. OLSON. Well, this is—— 

Mr. CONYERS. I don’t want to put him at the head of the line, 

but we can’t have a hearing and talk about this academically and 

philosophically, and here is a victim right at the table with you. 

What are you going to do about him? 

Ms. OLSON. First, after the hearing, I am certainly going to offer 

my assistance. 

Mr. CONYERS. Okay. 

Ms. OLSON. But my criticism of the IRS right now is his particular case, up until yesterday, the IRS had no procedures to take 

that return, that is the false return, off of his account and let him 

file a fresh return that is his return so he can get his refund. 

Up until yesterday, the IRS had no procedures, even though they 

knew since 2003 that they were supposed to do that under the law. 

Mr. CONYERS. Well, I know two Members, three Members on this 

Committee that are ready to call the IRS immediately after this 

hearing and get that corrected. 

Ms. OLSON. Thank you. 

Mr. CONYERS. I mean, this is outrageous. We are talking like this 

is philosophy, and in real life—and I commend you for being here. 

And you weren’t even our witness. I commend the Committee for 

having you both here. But can we all get on this and get this in? 

You don’t have any objection to this, do you, Ms. Sparkman? 

Ms. SPARKMAN. Mr. Conyers, I will take back his information to 

my colleagues and to my department. 

Mr. CONYERS. Well, that is not enough. I mean, I am going to 

take it back to them. You don’t have to worry about you taking it 

back to them because I want this—I want to get this accomplished. 

I mean, they could be looking at the hearing. It is being published nationally. So taking it back to them isn’t enough. I want 

some action. 

Ms. OLSON. Congressman Conyers, I have to say in defense of my 

colleague that it was Criminal Investigation that asked chief counsel of IRS four times whether the IRS must remove that bad return. They were trying to get a solution. 

It is the civil side that has been dragging its feet, and I, myself, 

personally ordered the IRS for years to do this. And like I say, it 

was only until yesterday that they complied. 

Mr. CONYERS. Well, Olson absolves you somewhat, Sparkman. 

But we have got to get moving on this. This is not a play hearing 

56 

or just file grievances, and then we all go home for the holiday. We 

have got to get going on this. 

And I expect you to be cooperating with Scott and Cohen, myself, 

and the Chair as well. 

Thank you very much, Mr. Chairman. 

Mr. MARINO [presiding]. You are welcome, sir. I do have some 

questions, but I am going to defer to my colleague, Mr. Cohen. And 

then I will wrap up the questioning. 

Mr. COHEN. Thank you. Appreciate it. 

First, I would like to thank the Chairman for calling this hearing, for all the work that Mr. Scott’s done in working with me on 

this issue about Mo’ Money, which has affected so many of his constituents and mine. 

Mr. Robinson, your story is one similar to one I have heard in 

Memphis. Do you know of other people in your jurisdiction, your 

area, who used Mo’ Money and had similar type of problems? 

Mr. ROBINSON. Yes, sir. I know a lot of people that is going 

through—they got checks that they can’t cash. They got checks—— 

Mr. MARINO. Sir, I don’t know if your microphone is on, or if you 

want to pull that a little closer as well? 

Thank you. 

Mr. ROBINSON. I have friends that is holding onto checks that 

they can’t cash. People, I was like, I got nephews that had the 

same situation. They went to different places and been turned 

down because the people are not accepting Mo’ Money checks, nowhere you could cash them. Some people’s checks is outdated. 

And—— 

Mr. COHEN. Were some of the checks for—you couldn’t get them 

cashed, and some places just wouldn’t accept Mo’ Money checks? 

Mr. ROBINSON. Right. 

Mr. COHEN. Did they charge large fees to cash those checks when 

you could get them cashed? 

Mr. ROBINSON. Yes, sir. And after they seen the news and all 

this going on, people just stopped taking the checks. 

Mr. COHEN. Did you know about the VITA program at the IRS 

where you could get your taxes filed without having to pay a fee? 

Did you know anything about that? 

Mr. ROBINSON. No, sir. 

Mr. COHEN. Let me ask Ms. Olson. That is a great program, and 

that is one of the things I think we need to come out of this is that 

the VITA program, low- and middle-income taxpayers can get their 

returns for free instead of paying companies like Mo’ Money. 

Why do people not know about it? Do we not have enough money 

to publicize this to people and let them know that they can get 

their taxes done for free? 

Ms. OLSON. I think it is a little bit that. I think it is also that 

people were going to get—to some of these entities to get refunds 

early, the refund anticipation loans, rather than having to wait to 

get their refunds through direct deposit or in the mail. And the IRS 

can’t, obviously, loan the money to the taxpayers in advance for 

their refunds. 

That is why they go to these places, I think. 

57 

Mr. COHEN. Do you or Ms. Sparkman or anybody else know, are 

these anticipatory loans regulated by anybody, like the Dodd-Frank 

tried to regulate a lot of loans? Is that part of what that regulates? 

Ms. OLSON. We have—in the last year and a half, we have seen 

a lot of activity through the bank regulators on these. And most of 

the banks have pulled out of the refund anticipation loan process. 

What we are seeing instead are these tax estimation loans where 

you take your last pay stub for the year and you go into one of 

these places, and they estimate, as with Mr. Robinson, based on 

the last pay stub what they think that you are due. And they give 

you a loan for that amount or maybe a percentage of the refund 

amount. And then they have a little form where you are supposed 

to check and say I agree to come back to this return preparer and 

file my actual taxes. 

Just like with Mr. Robinson, we have seen cases where taxpayers 

haven’t signed that form. They have gone to somewhere else to file 

their return, and the original place where they have gone to get the 

estimation loan goes ahead and files their return based on the pay 

stub. They don’t even have full information. 

Mr. COHEN. Should this type of conduct be made illegal? Should 

people not be allowed to use their IRS returns to—basically, by 

doing that, it encourages the preparer to find ways to defraud the 

Government to get the money for themselves. 

Ms. OLSON. And we also have evidence that these products increase the risk that people are claiming things on their returns 

that they are not entitled to. So it also increases tax noncompliance. 

I think that—— 

Mr. COHEN. Would that be what—go ahead. 

Ms. OLSON. I was just going to say it is a banking regulation 

issue who owns these kinds of loans. And I don’t know the answer 

to that. 

Mr. COHEN. Mr. Zinman, you were nodding your head. 

Mr. ZINMAN. Well, I think the Mo’ Money tax scheme is probably 

the tip of the iceberg. It is one that came out. There are so many 

unscrupulous preparers that are signing and filing returns as selfprepared, getting refund anticipation loans or getting the money 

put into their accounts, and not filing as registered tax preparers. 

NCCPAP has seen a lot of that. That is why we spearheaded the 

PTIN registration to eliminate the tax preparers’ Social Security 

numbers. That is why we worked very closely with the IRS to bring 

about the registered tax preparer issues because we need to get the 

whole system—especially with the e-file system, we need to get this 

whole system regulated so that unscrupulous people don’t do these 

things. 

Mr. COHEN. Ms. Sparkman mentioned that, that the registration 

requirement for preparers and a competency test, continuing education requirements. Is that sufficient? Is the test sufficient? 

Should it be stronger? 

Mr. ZINMAN. It is a start. I know we have talked with David Williams in the IRS, and he—it is just a start. It is going to take a 

while before he sees whether the testing is meeting the minimum 

requirements. I would say it is a good start. It is a step forward 

58 

rather than a step backward, and they are at least addressing this 

issue. 

I think we need to address the issues like the Mo’ Money type 

of preparers, and there are still a lot of preparers out there that 

are not signing returns that are completely avoiding the law. 

Mr. COHEN. If I can have 30 additional seconds, without objection? Thank you. 

Do you see any problem with a law that would require that the 

return, the refund be made to the citizen and to not allow refunds 

to go to a third party? Would that affect legitimate folks such as 

yourself? 

Mr. ZINMAN. I have been wrestling with that issue for a long 

time. And within our organization, we have talked about all sorts 

of fraud that can be perpetuated and brought upon citizens. And 

it is an issue. It is a concern. 

Some of our members have advocated that a refund not be allowed to go to a bank account unless the IRS confirms the name 

on the bank account, as well as the account number. That is being 

advocated by some people, and perhaps that is an alternative. 

Again, we have to get into the whole issue of banking regulations 

when we get into that. 

Mr. COHEN. Thank you, Mr. Chairman. 

I appreciate it. I yield back the balance of my time, which doesn’t 

exist. 

Mr. MARINO. You are welcome. I have one question. 

There was a request from my colleagues to ask additional questions. I think that because of the time, we do have additional time 

to ask questions. 

I have one question that I would like to present. But before I do 

that, I have to ask for unanimous consent that Mr. Gohmert’s 

statement be entered into the record. 

I am hearing no objection, and so ordered. 

[The prepared statement of Mr. Gohmert follows:] 

Prepared Statement of the Honorable Louie Gohmert, a Representative in 

Congress from the State of Texas, and Vice-Chairman, Subcommittee on 

Crime, Terrorism, and Homeland Security 

Today’s hearing examines the growing trend of identity theft tax fraud, and fraudulent activities by tax preparation companies. 

Tax fraud through identity theft occurs when scam artists file fake tax returns 

claiming to be another person with the IRS or fraudulently claim someone as a dependent in order to receive an illegal refund. 

Criminals obtain Social Security Numbers and other taxpayer information from 

various sources, including hospitals, schools, and pension funds. Another common 

source for this information ironically is the federal government itself, through the 

Social Security Administration’s Death Master File—a list containing the full name, 

Social Security Number, date of birth, and address information for every person who 

dies in the United States that is published each year. 

This crime can be devastating to victims, who often have to spend months and 

even years fighting to establish their identity to the IRS and waiting to receive any 

refunds actually owed to them. It is also devastating to taxpayers as a whole. While 

the IRS estimates that it stopped over $6.5 billion dollars in fraudulent refunds in 

2010 alone, it also estimates that it still paid out approximately $5.2 billion that 

same year to fraudulent filers. This is taxpayer money that should have been used 

for much better purposes. 

59 

The IRS is working with the Department of Justice to investigate and prosecute 

these identity theft cases. For example, in January of this year, the IRS and DOJ 

announced a nationwide sweep of identity theft scam artists that resulted in actions 

against 105 individuals in 23 states. While I applaud these efforts, it is clear that 

there is still much work to be done. 

A different but related problem is fraud by tax preparation companies. Unscrupulous tax preparers have been accused of preying on the most vulnerable by offering 

advance loans against income tax returns, or promising unrealistically high refunds 

that are based on intentionally false information. The Justice Department recently 

sued one such company but, again, it appears that there is still work to be done. 

The Assistant Attorney General for Tax, Kathryn Keneally, recently testified before the Subcommittee on Courts, Commercial and Administrative Law about the 

Justice Department’s efforts to stop both identity theft and tax preparation fraud. 

I look forward to hearing from our witnesses today about what else can be done to 

stop these destructive, and ever expanding, crimes. 

Mr. MARINO. My question is pretty straightforward and simple, 

but I would like to start with Ms. Sparkman and anyone else who 

would like to comment on it. 

It has been reported that in 2009, U.S. prisoners, United States 

prisoners in Federal prisons in this Nation collected a staggering 

$130 million in fraudulent tax returns, $130 million in fraudulent 

tax returns and refunds. 

I understand that in 2010, after pressure from several United 

States Senators, the IRS and the Bureau of Prisons signed a 

memorandum of understanding to address this growing problem. 

What has been the progress of this agreement and collaboration? 

And is there anything that Congress can do and should do to help 

both the IRS and BOP crack down on this criminal behavior? 

And being very familiar with the law enforcement segment and 

Bureau of Prisons, put my share of people in Federal prison, I 

know that routinely mail coming in and mail going out is read by 

the authorities. How is this happening that inmates are collecting 

$130 million in fraudulent tax returns? 

Ms. Sparkman, please? 

Ms. SPARKMAN. Chairman Gohmert, thank you very much for 

asking this question. 

I will tell you that one way that you can help us is to reimplement the prisoner tax compliance strategy. We had a strategy 

where we were able to exchange data with prisons for State prisons 

and Federal prisons, tax return information specific when fraudulent activity is detected. That expired in December of 2011, and it 

was not reupped. 

It is in the 2013 budget that we have proposed that you reestablish that authority to allow us to share information back and forth 

with these prisons. Because, as you well know, when you are already in prison, another prison sentence on top of a very hefty sentence is not as much of a deterrent, this would go a long way to 

reestablish this into helping us continue to exchange information 

in this area. 

Mr. MARINO. Anyone else wish to comment? You did spawn another question that I do have. Tax returns are an obvious document. It is just not a little letter put into an envelope. 

60 

Have you ever discussed with or have any information from the 

Bureau of Prisons as to how these are getting through the system 

at the Bureau of Prisons? 

Ms. SPARKMAN. I don’t have that specific information. However, 

I can tell you that the Bureau of Prisons does provide information 

to us regularly about fraud they are detecting. They can send us 

information. We just need this reimplementation to share back. 

And so, we have seen that. Remember, there are different ways 

to file your tax return, not only through the mail, but also electronically. 

Mr. MARINO. Well, certainly, I would think that the Bureau of 

Prisons is monitoring what is going out on electronic mail, if that 

is the case. 

We are going to have to—— 

Mr. CONYERS. Would the gentleman from Pennsylvania yield for 

a question? 

Mr. MARINO. Yes, sir. 

Mr. CONYERS. Thank you. 

Are you implying that the prison system is in on this scheme? 

Mr. MARINO. No. 

Mr. CONYERS. Okay. Then can I ask you then do you think it is 

being generated by outside forces, or how is this being done? It is 

a staggering—— 

Mr. MARINO. I do not know. That is why I am asking the questions. And certainly, I did not imply, I don’t know how you inferred 

that I thought the Bureau of Prisons was part of this. 

But that is not the case. I think it is simply someone in the prison has—an inmate has decided, well, I am going to try this, and 

it worked. 

Mr. CONYERS. But millions of dollars, that means—I mean, are 

all the smart guys in the Federal prisons? I don’t get it, and I appreciate your candor that you don’t know either. I had never heard 

of this before just now. That is why I just wanted to get as much 

clarification as I could. 

Mr. MARINO. Well, we are going to try and get that clarification. 

And I know what the prison officers go through. I know their responsibilities, and I know the number of individuals that they have 

to monitor. 

So something is falling through the cracks here. We will find out 

one way or another and correct this problem. 

My colleague, Ranking Member Mr. Scott has some more questions. 

Mr. SCOTT. Thank you. 

Ms. Sparkman, did I understand from your previous testimony 

that there is a fund out of which victims like Mr. Robinson can get 

paid, be made whole, while the investigation goes on? 

Ms. SPARKMAN. I did not—I don’t know of a particular fund. 

However, Mr. Scott, what I did say is that when victims are victimized like this, they can work with our victim assistance program, 

and then they can work with them so we know who the real taxpayer is. And they can file their real return and then be able to 

get their refund while we are investigating, yes, the perpetrator 

who stole their identification—— 

61 

Mr. SCOTT. So this would be an avenue for victims of Mo’ Money 

Taxes to become whole while the investigation goes on? 

Ms. SPARKMAN. That is correct. For victims of these types of 

schemes, they can come to our victim assistance program. We are 

continuing to improve our processes and procedures in working 

with the taxpayer advocate. 

Mr. SCOTT. Okay. Ms. Olson, as an advocate, have you been able 

to utilize that program? 

Ms. OLSON. Pardon? 

Mr. SCOTT. Have you been able to help victims utilizing that program? 

Ms. OLSON. We are part and parcel of that program. And in most 

instances, these victims come to us because they have not been 

able to get the assistance through the Victims Assistance Unit. It 

takes so long, and they economic emergencies. 

They will not get a refund until the account has been cleaned up 

and they have proven that they are the taxpayers and not the perpetrators. And that can take months and a lot of document requests. 

And as I said, in Mr. Robinson’s case, up until yesterday there 

were no procedures to make them whole. The fund that the money 

is paid out of, if it is a paper check, is called the Check Forgery 

Insurance Fund. That is set up by statute. But the language 

speaks specifically about paper checks, and our counsel said it can’t 

be read for electronic. 

Mr. SCOTT. Okay. So we have some work to do to see if we can’t 

conform that. 

And Mr. Chairman, just a word about the ID theft bill that has 

been referred to. One of the problems with that pending legislation 

is the fact that it includes mandatory minimum sentences. 

Mandatory minimum sentences have been studied and have been 

shown to disrupt normal intelligent sentencing processes, waste the 

taxpayers’ money, do nothing to reduce crime, violate common 

sense. And a recent example of a mandatory minimum is the case 

of Marissa Alexander in Florida, who was given 20 years mandatory minimum for firing a warning shot to ward off her abusive 

husband. 

Had she, on the other hand, just leveled the firearm, shot him 

and killed him, and been charged with voluntary manslaughter, 

the maximum she could have been looking at was 15 years. But because of the simple-minded mandatory minimum, she had to be 

sentenced to 20 years, not the 15 she would have been sentenced 

if she had just killed him and had been charged with manslaughter. 

And so, I would hope that in order to get some of these mandatory minimums off the books, the first thing we have to do is stop 

passing new ones. And so, I would hope that as we continue trying 

to do something about ID theft, we don’t make matters worse by 

adding to mandatory minimums. 

And I thank you for your generosity on the time. 

Mr. MARINO. Any other of my colleagues have additional questions? Mr. Conyers? 

Mr. CONYERS. Sure. Thank you, sir. 

62 

I want to pick up on where Ranking Member Scott left off on 

mandatory minimums. Mandatory minimums is in the Chairman 

Smith-Wasserman Schultz bill. And I know three people on this 

Committee, and the Chairman from Pennsylvania may make the 

fourth, we are all against mandatory minimums for the reasons 

that Ranking Member Scott just went through. 

Just as a matter of information, where are all of you on the mandatory minimum situation? And you are free to evade this question 

if you want to because it is not directly connected to the hearing, 

but it is an important part of us understanding where we all stand 

on these matters. 

Ms. Sparkman. 

Ms. SPARKMAN. I would definitely need to defer to my colleagues 

at the Department of Justice because that is in the purview of the 

courts. But I do think we should still continually actively investigate these crimes. I believe that jail sentences are a deterrence. 

But as to the actual amount of time, I would defer to my colleagues 

at the Department of Justice. 

Mr. CONYERS. What a dodge. 

Okay. Ms. Olson, can you do any better? 

Ms. OLSON. Well, I am going to dodge on the mandatory minimums, but let me say about in general the risk of committing this 

crime needs to be increased. Because right now—— 

Mr. CONYERS. Yes, the sentencing. And that is our—— 

Ms. OLSON. Yes. That is—— 

Mr. CONYERS. That is how we take care of eliminating the mandatory minimum provision is by increasing the sentencing. But 

that is leaving it to the court. That is the discretion of the judge, 

which is, in our opinion, where these decisions ought to rest rather 

than on an automatic law that takes the discretion out of the 

court’s hands. 

Ms. OLSON. Yes, but I am not going to comment on mandatory 

minimums. 

Mr. CONYERS. Well, now you are not with the Government. 

Mr. ZINMAN. No, I am not. 

Mr. CONYERS. Mr. Zinman? 

Mr. ZINMAN. I am only a CPA. I am not an attorney. 

Mr. CONYERS. Right. 

Mr. ZINMAN. But I do know identity theft, tax fraud very often 

is a low-risk, high-yield situation, and we have got to switch that 

around. We have got to do something about making this an issue 

that there are some real problems to face if you get caught doing 

this, and we need to address the real issues of where they are coming from. 

A lot of this stuff—— 

Mr. CONYERS. Do you think mandatory minimums, you think the 

people committing these crimes check to see if there is a mandatory minimum before they do it? 

Mr. ZINMAN. I do not think that they check to see that there is 

a mandatory minimum, but I think that they do believe that it is 

a low-risk crime. 

Mr. SCOTT. Would the gentleman yield? 

Mr. CONYERS. Surely. 

63 

Mr. SCOTT. The low risk is whether you get caught or not, and 

what happens in sentencing is later on in the process. To increase 

the risk, you have to increase the investigation and prosecution. 

What happens in sentencing is further down the line, and most 

people calculate whether they are going to get caught or not, not 

as much what the penalty is going to be. 

Mr. ZINMAN. That is right, and that is why I am a CPA and not 

an attorney. 

Mr. CONYERS. Well, CPAs can have an opinion on mandatory 

minimum. 

Mr. ZINMAN. Yes. 

Mr. CONYERS. You don’t get excused because you are not a lawyer. 

Mr. ZINMAN. That is correct. 

Mr. CONYERS. We invited you here maybe because you weren’t a 

lawyer. 

Mr. ZINMAN. That is right, and we are—the CPAs, I can’t speak 

for every one of them. But as a whole, we are the trusted professionals, and we do want the law enforced. Whatever the Congress 

decides, whatever the attorneys and the courts decide is the law, 

we will allow that. But we do want some sort of enforcement because the e-file tax system is starting to run amok. 

Mr. CONYERS. Sure. Well, we are talking about lengthening the 

time, the sentencing, increasing the period of incarceration when 

you are caught as a replacement to mandatory minimums. So I put 

you in the dodger category with the other two witnesses. [Laughter.] 

Mr. COHEN. Mr. Chair? 

Mr. MARINO. Please, go ahead, sir. 

Mr. COHEN. Thank you. 

Let me ask Ms. Sparkman a question. In this time of budget constraints and desires by all of us to deal with the deficit, is cutting 

monies to the IRS in some of these across-the-board type things, 

is that counterproductive in that if the IRS has more money for 

agents and for scrutiny of returns that the return to the United 

States Government will be greater? The more money the IRS has 

to enforce its laws, would that result in greater revenues to the 

United States Government? 

Ms. SPARKMAN. Well, certainly, Mr. Cohen, more resources have 

more work, and I will tell you that in our 2013 budget proposal, 

there is a provision in there for increased resources specifically for 

identity theft. And those resources are in there to be across the 

board to help all sorts of different departments in the Internal Revenue Service attack this critical, critical issue. 

And I will also tell you that even in these declining resource 

times, the IRS has taken steps to move our current resources into 

this very critical area of identity theft so that we can combat this 

problem with our current resources, and we have moved those resources today. 

Mr. COHEN. And let me ask you this. You can’t comment on an 

ongoing investigation. 

Ms. SPARKMAN. That is correct. 

Mr. COHEN. But we know that the IRS did raid the Mo’ Money 

company in Memphis and get certain information. When a comVerDate Aug 31 2005 13:07 Sep 12, 2012 Jkt 000000 PO 00000 Frm 00067 Fmt 6633 Sfmt 6601 H:\WORK\CRIME\062812\74819.000 HJUD1 PsN: DOUGA
64 

pany has a name like Mo’ Money, which probably should have been 

‘‘Mo’ Money than you are entitled to,’’ shouldn’t the IRS look at 

some companies like that and look at them before Mr. Robinson 

and other people are taken advantage of and then the case comes 

to your attention through Mr. Scott and my office, the media, et 

cetera? 

Ms. SPARKMAN. Mr. Cohen, I appreciate your question. Obviously, in criminal investigations, we have to look at the evidence 

that leads to the crime. Simply a name is not necessarily illegal 

to—— 

Mr. COHEN. It is not illegal. But you don’t have to have probable 

cause necessarily, do you, to look into something? Maybe you start 

to check some returns and see if there are like a pattern of behavior. 

Ms. SPARKMAN. We have actively pursued and looked at many 

unscrupulous preparers from across the Nation, who appear to be 

doing bad things and victimizing folks like this and like Mr. Robinson. 

Mr. COHEN. All this money in this scheme was going to different 

banks, and they would send the money, as I understand it, the 

agency would be asked to send the money to Up2U, ‘‘Up 2 U.’’ Not 

up with Chris Hayes, but Up2U. And then deposit the money in 

Value Bank, and then Up2U would tell the company called TRX Alliance that the money is in the bank, and they would go ahead. 

And Mo’ Money—— 

There is a lot of float involved here, isn’t there? 

Ms. SPARKMAN. A lot of—I am sorry? 

Mr. COHEN. Float. Money that is just sitting there, and there is 

interest collected by somebody. 

Ms. Olson, you seem to know float. Do you want to float with 

that one? 

Ms. OLSON. I am just rather amazed at the scheme you have described. The IRS has filters that they use to identify patterns of return filing. And so, rather than just looking at a name of an entity, 

what they would look at is the data based on the returns coming 

in, and that will actually help us focus on here is a return preparation firm or here is a return preparer that is associated with all 

these—you know, what questionable returns. 

And that is when we would go out and focus. And certainly, some 

of those screens are through the Criminal Investigation Division. 

That is how they develop many of their cases. 

So it is really a data-based issue. But in the meantime, the legitimate taxpayers’ returns are coming in and also being frozen, as 

well as these questionable ones. 

Mr. COHEN. Mr. Zinman, have you looked at Mo’ Money and 

other firms like this and the fees they charge people and the fees 

the banks charge, et cetera? Are you familiar with it? 

Mr. ZINMAN. We have seen that, yes. 

Mr. COHEN. And how are they compared to the fees that traditional CPAs would charge? 

Mr. ZINMAN. Interestingly, they are not a whole lot cheaper 

sometimes than what regular CPAs charge, who don’t get involved 

in return anticipation or advance loans or any of these things. 

CPAs who perform the work and legitimate registered tax preVerDate Aug 31 2005 13:07 Sep 12, 2012 Jkt 000000 PO 00000 Frm 00068 Fmt 6633 Sfmt 6601 H:\WORK\CRIME\062812\74819.000 HJUD1 PsN: DOUGA
65 

parers who perform the work very often perform it at a reasonable 

fee. 

Jackson Hewitt performed the work for Mr. Robinson, and I 

would imagine it was a reasonable fee, and they prepared a correct 

return. So a lot of these companies or individuals who do these 

schemes really are not looking for the fees. They don’t care about 

the fees. They care about the refunds and getting the money. 

Mr. COHEN. And then the fees that they charge for the anticipatory loans is really where they—— 

Mr. ZINMAN. Oh, the fees—the rates are ridiculous, yes. 

Mr. COHEN. And this has put a bad tenor over the entire industry, including your group. Is your group, which has not been part 

of this, doing anything to try to help either the victims of these 

scams or the industry to come up with higher and better standards? 

Mr. ZINMAN. We constantly work with governmental agencies. 

Within my testimony, written testimony, I mention that New York 

State did something this year. And I am actually going to go up 

to Albany this summer and ask them what they were thinking because on the tax return where you send a copy of the tax return 

to the individual to get approval, it asks for—the New York State 

tax return asks for your name, address, Social Security number, 

and date of birth. Sort of an invitation for somebody to steal an 

identity. 

So NCCPAP continuously works with governmental agencies. We 

work closely with the IRS. As a matter of fact, there is a NCCPAP 

member right now at the IRS for the National Public Liaison meeting because we constantly try to inform them of what we see going 

on, boots on the ground, so to speak. 

Mr. COHEN. I want to thank, once again, the Chairman for holding the hearing, Mr. Scott, our Chairman today, and all the panelists. This is very important because this is a rip-off both of citizens, 

who are the most vulnerable and need these refunds and are being 

taken advantage of, and a rip-off of the Government. 

And they are ripping off from both directions. And it really is 

hundreds of millions of dollars if it came from the prison folks, but 

also in general of tax fraud costing us money that could be used 

to help offset the deficit. 

Thank you, and I yield back the balance of my time. 

Mr. MARINO. I just have a request and a statement, and we will 

bring this to a conclusion. 

Ms. Sparkman, could you inquire with the Bureau of Prisons the 

issue that we discussed about the inmates collecting refunds and 

perhaps get an explanation? And I am going to do the same thing 

as well. 

Ms. SPARKMAN. Yes, sir. 

Mr. MARINO. And when you get that information from them, 

would you please forward it to the Committee, to the Chair, and 

we will compare it with the response that I get. 

And in conclusion, my colleagues, and I want Mr. Conyers to 

know that he knows that I support mandatory minimums—I am 

not going to dodge the issue, sir—to a certain extent and in certain 

situations. And I look forward to discussing with my colleagues the 

66 

issue of mandatory minimums and how we can come to an understanding. 

I do find it interesting and it is an interesting concept on how 

eliminating mandatory minimums is going to increase the penalties. But I think that is a discussion for another day. I don’t want 

to take—— 

Mr. CONYERS. Would the gentleman yield? Just briefly, we are 

substituting, we are not trying to keep mandatory minimums and 

increase the penalties. We are trying to increase the penalties so 

that that will be a larger deterrent, but we will be transferring 

that judgment to the courts and not to Members of Congress. 

Mr. MARINO. That is part of the debate. And as a prosecutor for 

19 years, I see the pros and cons of each. So look forward to working with you on these issues, sir. 

Mr. CONYERS. Thank you very much. 

Mr. MARINO. And I know that my colleague Mr. Scott cited a 

case. And if you would be so kind, I would like to—if you would 

be able to at some point give me the cite on that case, I would like 

to look into it because—— 

Mr. SCOTT. Marissa Alexander’s case has been widely reported. 

Mr. MARINO. Okay. 

Mr. SCOTT. It is particularly in light of the fact that it is in Florida, with all of the what happens when somebody shoots somebody 

controversy in Florida. For her to get 20 years mandatory minimum, and we will provide you with—— 

Mr. MARINO. Would you? Because I would like to read that, and 

I want to be part of preventing an injustice. Although I do have to 

add, sir, that being involved in many drug raids, it is not unusual 

for a shot to be fired from the drug dealer’s side as a warning. 

So I just want to know the details, and hopefully, we can eliminate situations if it is—— 

Mr. SCOTT. The point of eliminating a mandatory minimum is it 

eliminates the requirement that the judge mindlessly impose a 

simple-minded sentence that makes no sense. If a sentence makes 

sense, the judge can impose it in appropriate cases. And in fact, 

that is what the Supreme Court said a couple of days ago with 

mandatory life without parole for juveniles. 

Didn’t say that life without parole for juveniles in non-homicide 

cases was unconstitutional. It said that making it mandatory in all 

cases whether it made sense or not was unconstitutional. But if 

you are going to apply that kind of sentence, you have to look at 

the individual case and make sure it is appropriate. 

Mr. MARINO. But we know with involving minors, particularly in 

cases of murder, that it is a different standard by which we review 

it because of the age of the individual. It is not that I disagree with 

that ruling, just it is apples and oranges compared to a 14-, 15-, 

or 16-year-old involved in a homicide and someone over the age of 

18. 

But again, that is an issue for another day, and I want to thank 

my colleagues. 

And in closing, I would like to thank our witnesses for their testimony today and coming in here and giving us your time and letting 

the American people know what is going on. 

67 

Without objection, all Members will have 5 legislative days to 

submit to the Chair additional written questions for the witnesses, 

which we will forward and ask the witnesses to respond as promptly as they can so that their answers may be part of the record. 

Without objection, all Members have 5 legislative days to submit 

any additional materials for inclusion in the record. 

With that, again, I thank the witnesses, my colleagues, the people visiting us, and this hearing is adjourned. 

Thank you, ladies and gentlemen. 

[Whereupon, at 11:07 a.m., the Subcommittee was adjourned.] 

(69) 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable Robert C. ‘‘Bobby’’ Scott, a Representative in Congress from the State of Virginia, and Ranking Member, 

Subcommittee on Crime, Terrorism, and Homeland Security 

Thank you, Chairman, for calling this hearing, particularly on the issue of tax 

preparer fraud. You will recall that Reps. Cohen, Rigell, Thompson of Mississippi, 

and I wrote to you in March requesting a hearing into the interstate activities of 

the tax preparation firm Mo Money. We have each had many constituents contact 

our offices with complaints regarding their dealings with Mo Money. I want to 

thank you for agreeing to our request by including this issue in today’s hearing, and 

I am pleased to welcome today Mr. Michael Robinson, from Virginia’s 3rd Congressional District, to tell us about his experience with the company. Thank you, Mr. 

Robinson, for making the trip up from Norfolk to share with us your experience. 

I look forward to hearing your testimony. 

Over the last several months I have heard troubling stories from many people in 

my district involving the tax preparation firm Mo Money. Some of these stories involve customers who assigned their refund from the IRS to Mo Money in order to 

get a refund anticipation loan. The checks these customers received from Mo Money 

containing their loans or refunds then ‘‘bounced,’’ and Mo Money has not made good 

on many of those bounced checks. Other stories involve customers who never received a tax refund at all, although IRS records reflect that refunds were sent to 

Mo Money pursuant to the customers’ assignments. Some customers say Mo Money 

deducted additional fees from their refund checks without their consent, or included 

additional deductions on their returns to which they were not legally entitled (and 

for which they would be penalized by the IRS), or submitted tax returns to the IRS 

without authorization or a signature, or did not give customers a copy of their tax 

returns. My colleagues Mr. Rigell, Mr. Cohen, and Mr. Thompson received similar 

complaints from their constituents, as well. 

According to reporting by WAVY TV in Portsmouth, and WTVR in Richmond, 

none of the Mo Money franchise locations listed on the Better Business Bureau web 

site are accredited, meaning they do not get the BBB’s seal of approval when it 

comes to good business practices. Many on the list received an ‘‘F’’ rating. In addition, two states have taken public action against Mo Money Taxes. In 2010, the Arkansas Attorney General sued Mo Money Taxes for failing to properly disclose fees 

on refund anticipation loans, and the company had to pay $25,000 in fines for illegal 

business practices. The Illinois Attorney General filed suit against the company this 

year for overcharging taxpayers and filing inaccurate returns. 

Complaints about what customers have experienced with Mo Money have been 

made to Congressional offices, the IRS, the department of Justice, and state and 

local authorities. I am sorry that Mr. Robinson was victimized, but I appreciate his 

willingness to make the sacrifices he had to make to come and tell us here today 

about his experience. I look forward to exploring what we can do to prevent this 

from happening to others. 

What we do to address the problems of fraud and identity theft should be effective 

and measured. While I appreciate the sentiments and efforts behind H.R. 4362, the 

70 

‘‘STOP Identity Theft Act of 2012,’’ which will be discussed here today, I cannot support an effort that seeks to stop one injustice by applying another. H.R. 4362 adds 

tax fraud as a predicate for aggravated identity theft under 18 U.S.C. § 1028A(c). 

The penalty for aggravated identity theft is a mandatory term of imprisonment of 

2 years or, for an offense related to terrorism, 5 years. Because of the mandatory 

minimum sentences included in H.R. 4362, this bill is not the solution to the problem of identity theft. It doesn’t mean that some should not be sentenced to these 

amounts, or more, but to require an unjust sentence to be imposed before any of 

the facts or circumstances of the case, or the characteristics of the defendant, are 

taken into account, is unnecessary and wrong. 

Mandatory minimums have been studied extensively and have been found to distort rational sentencing systems, to discriminate against minorities, to waste the 

taxpayer’s money and to often violate common sense. Even if everyone involved in 

a case, from arresting officer, prosecutor, judge and victim, believes that the mandatory minimum would be an unjust sentence for a particular defendant in a case, it 

still must be imposed. Mandatory minimum sentences, based merely on the name 

of a crime, remove sentencing discretion from the judge. Regardless of the role of 

the offender in the particular crime, the offender’s record or lack thereof, or the 

facts and circumstances of the case, the judge has no discretion but to impose the 

mandatory minimum set by legislators long before the crime has been committed. 

This is what brings about results such as that in the recent case of Marissa Alexander, a mother of 3 and graduate student, who was sentenced to a mandatory minimum sentence of 20 years for discharge a gun to warn off an abusive husband during a dispute. Ironically, if she had intentionally shot and killed him under such 

circumstances, the maximum penalty for voluntary manslaughter is 15 years! 

The two year and five year mandatory sentences in H.R. 4362 are, therefore, problematic, even though I support the intent of the sponsors to do more to address identity theft. This is the third mandatory minimum we have considered in a month, 

and each time we hear, ‘‘This bill is not a new mandatory minimum, it’s just adding 

a new crime to a statute that already has a mandatory minimum’’ or ‘‘it’s just one 

more.’’ First it was synthetic drugs, then VAWA, now it’s identity theft. We need 

to stop passing mandatory minimums. Identity theft is a serious problem, but mandatory minimum sentences are never the solution. 

I again thank the Chairman for calling this hearing and welcome Mr. Robinson 

and the other witnesses, and I yield back my time. 

Æ