II 

113TH CONGRESS 

2D SESSION S. 2736 

To amend the Internal Revenue Code of 1986 to prevent identity theft 

related tax refund fraud, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 31, 2014 

Mr. HATCH (for himself and Mr. WYDEN) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to prevent 

identity theft related tax refund fraud, and for other 

purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; ETC. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Tax Refund Theft Prevention Act of 2014’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment 

9 to, or repeal of, a section or other provision, the reference 


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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986. 

3 (c) TABLE OF CONTENTS.—The table of contents of 

4 this Act is as follows: 

Sec. 1. Short title; etc. 

Sec. 2. Safe harbor for de minimis errors on information returns and payee 

statements. 

Sec. 3. Internet platform for Form 1099 filings. 

Sec. 4. Requirement that electronically prepared paper returns include scannable code. 

Sec. 5. Single point of contact for identity theft victims. 

Sec. 6. Criminal penalty for misappropriating taxpayer identity in connection 

with tax fraud. 

Sec. 7. Extend Internal Revenue Service authority to require truncated social 

security numbers on Form W–2. 

Sec. 8. Improvement in access to information in the National Directory of New 

Hires for tax administration purposes. 

Sec. 9. Password system for prevention of identity theft tax fraud. 

Sec. 10. Increased penalty for improper disclosure or use of information by preparers of returns. 

Sec. 11. Increase electronic filing of returns. 

Sec. 12. Increased real-time filing. 

Sec. 13. Limitation on multiple individual income tax refunds to the same account. 

Sec. 14. Identity verification required under due diligence rules. 

Sec. 15. Report on refund fraud. 

5 SEC. 2. SAFE HARBOR FOR DE MINIMIS ERRORS ON INFOR6 MATION RETURNS AND PAYEE STATEMENTS. 

7 (a) IN GENERAL.—Subsection (c) of section 6721 is 

8 amended— 

9 (1) by striking ‘‘EXCEPTION FOR DE MINIMIS

10 FAILURE TO INCLUDE ALL REQUIRED INFORMA11 TION’’ in the heading and inserting ‘‘EXCEPTIONS

12 FOR CERTAIN DE MINIMIS FAILURES’’, 

13 (2) by striking ‘‘IN GENERAL’’ in the heading of 

14 paragraph (1) and inserting ‘‘EXCEPTION FOR DE


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1 MINIMIS FAILURE TO INCLUDE ALL REQUIRED IN2 FORMATION’’, and 

3 (3) by adding at the end the following new 

4 paragraph: 

5 ‘‘(3) SAFE HARBOR FOR CERTAIN DE MINIMIS

6 ERRORS.— 

7 ‘‘(A) IN GENERAL.—If, with respect to an 

8 information return filed with the Secretary— 

9 ‘‘(i) there are 1 or more failures de10 scribed in subsection (a)(2)(B) relating to 

11 an incorrect dollar amount, and 

12 ‘‘(ii) no single amount in error differs 

13 from the correct amount by more than 

14 $25, 

15 then no correction shall be required and, for 

16 purposes of this section, such return shall be 

17 treated as having been filed with all of the cor18 rect required information. 

19 ‘‘(B) EXCEPTION.—Subparagraph (A) 

20 shall not apply to returns required under sec21 tion 6049. 

22 ‘‘(C) REGULATORY AUTHORITY.—The Sec23 retary may issue regulations to prevent the 

24 abuse of the safe harbor under this paragraph, 

25 including regulations providing that this subVerDate Mar 15 2010 21:51 Aug 12, 2014 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2736.IS S2736

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1 paragraph shall not apply to the extent nec2 essary to prevent any such abuse.’’. 

3 (b) FAILURE TO FURNISH CORRECT PAYEE STATE4 MENTS.—Subsection (c) of section 6722 is amended by 

5 adding at the end the following new paragraph: 

6 ‘‘(3) SAFE HARBOR FOR CERTAIN DE MINIMIS

7 ERRORS.— 

8 ‘‘(A) IN GENERAL.—If, with respect to any 

9 payee statement— 

10 ‘‘(i) there are 1 or more failures de11 scribed in subsection (a)(2)(B) relating to 

12 an incorrect dollar amount, and 

13 ‘‘(ii) no single amount in error differs 

14 from the correct amount by more than 

15 $25, 

16 then no correction shall be required and, for 

17 purposes of this section, such statement shall be 

18 treated as having been filed with all of the cor19 rect required information. 

20 ‘‘(B) EXCEPTION.—Subparagraph (A) 

21 shall not apply to payee statements required 

22 under section 6049. 

23 ‘‘(C) REGULATORY AUTHORITY.—The Sec24 retary may issue regulations to prevent the 

25 abuse of the safe harbor under this paragraph, 


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1 including regulations providing that this sub2 paragraph shall not apply to the extent nec3 essary to prevent any such abuse.’’. 

4 (c) CONFORMING AMENDMENTS.— 

5 (1) Subsection (i) of section 408 is amended by 

6 striking ‘‘$10’’ and inserting ‘‘$25’’. 

7 (2) Paragraph (5) of section 3406(b) is amend8 ed— 

9 (A) by striking ‘‘$10’’ both places it ap10 pears and inserting ‘‘$25’’, and 

11 (B) by adding at the end the following 

12 flush text: 

13 ‘‘The preceding sentence shall not apply to payments 

14 of interest to which section 6049 applies.’’. 

15 (3) Subparagraphs (A) and (B) of section 

16 6042(a)(1) are each amended by striking ‘‘$10’’ and 

17 inserting ‘‘$25’’. 

18 (4) Paragraph (2) of section 6042(a) is amend19 ed by striking ‘‘$10’’ and inserting ‘‘$25’’. 

20 (5) Paragraphs (1) and (2) of section 6044(a) 

21 are each amended by striking ‘‘$10’’ and inserting 

22 ‘‘$25’’. 

23 (6) Paragraph (1) of section 6047(d) is amend24 ed by striking ‘‘$10’’ and inserting ‘‘$25’’. 


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1 (7) Subsection (a) of section 6050B is amended 

2 by striking ‘‘$10’’ and inserting ‘‘$25’’. 

3 (8) Subsection (a) of section 6050E is amended 

4 by striking ‘‘$10’’ and inserting ‘‘$25’’. 

5 (9) Paragraphs (1) and (2) of section 6050N(a) 

6 are each amended by striking ‘‘$10’’ and inserting 

7 ‘‘$25’’. 

8 (10) Paragraphs (1) and (2) of section 6652(a) 

9 are each amended by striking ‘‘$10’’ and inserting 

10 ‘‘$25’’. 

11 (11) The heading of subsection (a) of section 

12 6652 is amended by striking ‘‘$10’’ and inserting 

13 ‘‘$25’’. 

14 (d) EFFECTIVE DATE.—The amendments made by 

15 this section shall apply to information returns required to 

16 be filed, and payee statements required to be provided, on 

17 or after the date of the enactment of this Act. 

18 SEC. 3. INTERNET PLATFORM FOR FORM 1099 FILINGS. 

19 (a) IN GENERAL.—Not later than 3 years after the 

20 date of the enactment of this Act, the Secretary of the 

21 Treasury (or such Secretary’s delegate) shall make avail22 able an Internet website or other electronic media, similar 

23 to the Business Services Online Suite of Services provided 

24 by the Social Security Administration, that will provide 


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1 taxpayers access to resources and guidance provided by 

2 the Internal Revenue Service and will allow taxpayers to— 

3 (1) prepare and file (in batches of not more 

4 than 50) Forms 1099, 

5 (2) prepare Forms 1099 for distribution to re6 cipients other than the Internal Revenue Service, 

7 and 

8 (3) create and maintain necessary taxpayer 

9 records. 

10 (b) EARLY IMPLEMENTATION FOR FORMS 1099– 

11 MISC.—Not later than 1 year after the date of the enact12 ment of this Act, the Internet website under subsection 

13 (a) shall be available in a partial form that will allow tax14 payers to take the actions described in such subsection 

15 with respect to Forms 1099–MISC required to be filed or 

16 distributed by such taxpayers. 

17 SEC. 4. REQUIREMENT THAT ELECTRONICALLY PREPARED 

18 PAPER RETURNS INCLUDE SCANNABLE 

19 CODE. 

20 (a) IN GENERAL.—Subsection (e) of section 6011 is 

21 amended by adding at the end the following new para22 graph: 

23 ‘‘(5) SPECIAL RULE FOR RETURNS PREPARED

24 ELECTRONICALLY AND SUBMITTED ON PAPER.—The 

25 Secretary shall require that any return of tax which 


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1 is prepared electronically, but is printed and filed on 

2 paper, bear a code which can, when scanned, convert 

3 such return to electronic format.’’. 

4 (b) CONFORMING AMENDMENT.—Paragraph (1) of 

5 section 6011(e) is amended by striking ‘‘paragraph (3)’’ 

6 and inserting ‘‘paragraphs (3) and (5)’’. 

7 (c) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to returns of tax the due date for 

9 which (determined without regard to extensions) is after 

10 December 31, 2014. 

11 SEC. 5. SINGLE POINT OF CONTACT FOR IDENTITY THEFT 

12 VICTIMS. 

13 (a) IN GENERAL.—Not later than 180 days after the 

14 date of the enactment of this Act, the Secretary of the 

15 Treasury (or such Secretary’s delegate) shall establish new 

16 procedures to ensure that any taxpayer whose return has 

17 been delayed or otherwise adversely affected due to mis18 appropriation of the taxpayer’s taxpayer identity (as de19 fined in section 6103(b)(6) of the Internal Revenue Code 

20 of 1986) has a single point of contact who— 

21 (1) is an individual employee of the Internal 

22 Revenue Service, and 

23 (2) tracks the case of the taxpayer from start 

24 to finish and coordinates with other specialized units 

25 to resolve case issues as quickly as possible. 


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1 (b) CHANGE OF CONTACT.—The procedures under 

2 subsection (a) shall provide that the single point of contact 

3 may be changed— 

4 (1) upon request of the taxpayer, or 

5 (2) in any case where the individual employee 

6 ceases employment or is otherwise unavailable for 

7 any period, or a change is required to meet agency 

8 staffing needs, but only if the taxpayer is notified of 

9 any such change within 5 business days. 

10 SEC. 6. CRIMINAL PENALTY FOR MISAPPROPRIATING TAX11 PAYER IDENTITY IN CONNECTION WITH TAX 

12 FRAUD. 

13 (a) IN GENERAL.—Section 7206 is amended— 

14 (1) by striking ‘‘Any person’’ and inserting the 

15 following: 

16 ‘‘(a) IN GENERAL.—Any person’’, and 

17 (2) by adding at the end the following new sub18 section: 

19 ‘‘(b) MISAPPROPRIATION OF IDENTITY.—Any person 

20 who willfully misappropriates another person’s taxpayer 

21 identity (as defined in section 6103(b)(6)) for the purpose 

22 of making any list, return, account, statement, or other 

23 document submitted to the Secretary under the provisions 

24 of this title shall be guilty of a felony and, upon conviction 

25 thereof, shall be fined not more than $250,000 ($500,000 


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1 in the case of a corporation) or imprisoned not more than 

2 5 years, or both, together with the costs of prosecution.’’. 

3 (b) AGGRAVATED IDENTITY THEFT.—Section 

4 1028A(c) of title 18, United States Code, is amended by 

5 striking ‘‘or’’ at the end of paragraph (10), by striking 

6 the period at the end of paragraph (11) and inserting ‘‘; 

7 or’’, and by adding at the end the following new para8 graph: 

9 ‘‘(12) section 7206(b) of the Internal Revenue 

10 Code of 1986 (relating to misappropriation of iden11 tity in connection with tax fraud).’’. 

12 (c) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to offenses committed on or after 

14 the date of the enactment of this Act. 

15 SEC. 7. EXTEND INTERNAL REVENUE SERVICE AUTHORITY 

16 TO REQUIRE TRUNCATED SOCIAL SECURITY 

17 NUMBERS ON FORM W–2. 

18 (a) IN GENERAL.—Paragraph (2) of section 6051(a) 

19 is amended by striking ‘‘his social security number’’ and 

20 inserting ‘‘an identifying number for the employee’’. 

21 (b) EFFECTIVE DATE.—The amendment made by 

22 this section shall take effect on the date of the enactment 

23 of this Act. 


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1 SEC. 8. IMPROVEMENT IN ACCESS TO INFORMATION IN 

2 THE NATIONAL DIRECTORY OF NEW HIRES 

3 FOR TAX ADMINISTRATION PURPOSES. 

4 (a) IN GENERAL.—Paragraph (3) of section 453(i) 

5 of the Social Security Act (42 U.S.C. 653(i)) is amended 

6 to read as follows: 

7 ‘‘(3) ADMINISTRATION OF FEDERAL TAX LAWS

8 RELATING TO FRAUD.—The Secretary of the Treas9 ury shall have access to the information in the Na10 tional Directory of New Hires for the sole purpose 

11 of identifying and preventing fraudulent tax return 

12 filings and claims for refund under the Internal Rev13 enue Code of 1986.’’. 

14 (b) EFFECTIVE DATE.—The amendment made by 

15 this section shall take effect on the date of the enactment 

16 of this Act. 

17 SEC. 9. PASSWORD SYSTEM FOR PREVENTION OF IDENTITY 

18 THEFT TAX FRAUD. 

19 (a) IN GENERAL.—The Secretary of the Treasury 

20 shall implement an identity theft tax fraud prevention pro21 gram under which any individual taxpayer may elect to 

22 be provided with a unique password which, as a result of 

23 such election, will be required to be included on any Fed24 eral tax return filed by such individual before the return 

25 will be processed. Such program shall be available not 

26 later than January 1 of the first calendar year beginning 


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1 on or after the date that is 2 years after the date of the 

2 enactment of this Act. 

3 (b) STUDY AND REPORT.—The Secretary of the 

4 Treasury shall conduct a study of the program under sub5 section (a) and, not later than 3 years after the January 

6 1 date under such subsection, shall report to the Com7 mittee on Finance of the Senate and the Committee on 

8 Ways and Means of the House of Representatives on the 

9 efficacy of such program in reducing tax refund fraud. 

10 Such report shall include a recommendation as to whether 

11 the program under subsection (a) should be made manda12 tory, rather than elective, for all taxpayers. 

13 SEC. 10. INCREASED PENALTY FOR IMPROPER DISCLO14 SURE OR USE OF INFORMATION BY PRE15 PARERS OF RETURNS. 

16 (a) IN GENERAL.—Section 6713 is amended— 

17 (1) by redesignating subsections (b) and (c) as 

18 subsections (c) and (d), respectively, and 

19 (2) by inserting after subsection (a) the fol20 lowing new subsection: 

21 ‘‘(b) ENHANCED PENALTY FOR IMPROPER USE OR

22 DISCLOSURE RELATING TO IDENTITY THEFT.— 

23 ‘‘(1) IN GENERAL.—In the case of a disclosure 

24 or use described in subsection (a) that is made in 

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1 priation of another person’s taxpayer identity (as de2 fined in section 6103(b)(6)), whether or not such 

3 crime involves any tax filing, subsection (a) shall be 

4 applied— 

5 ‘‘(A) by substituting ‘$1,000’ for ‘$250’, 

6 and 

7 ‘‘(B) by substituting ‘$50,000’ for 

8 ‘$10,000’. 

9 ‘‘(2) SEPARATE APPLICATION OF TOTAL PEN10 ALTY LIMITATION.—The limitation on the total 

11 amount of the penalty under subsection (a) shall be 

12 applied separately with respect to disclosures or uses 

13 to which this paragraph applies and to which it does 

14 not apply.’’. 

15 (b) CRIMINAL PENALTY.—Section 7216(a) is amend16 ed by striking ‘‘$1,000’’ and inserting ‘‘$1,000 ($100,000 

17 in the case of a disclosure or use to which section 6713(b) 

18 applies)’’. 

19 (c) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to disclosures or uses after the date 

21 of the enactment of this Act. 

22 SEC. 11. INCREASE ELECTRONIC FILING OF RETURNS. 

23 (a) IN GENERAL.—Subparagraph (A) of section 

24 6011(e)(2) is amended by striking ‘‘250’’ and inserting 

25 ‘‘the applicable number of’’. 


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1 (b) APPLICABLE NUMBER.—Subsection (e) of section 

2 6011, as amended by this Act, is amended by adding at 

3 the end the following new paragraph: 

4 ‘‘(6) APPLICABLE NUMBER.—For purposes of 

5 paragraph (2)(A), the applicable number is— 

6 ‘‘(A) in the case of returns and statements 

7 relating to calendar years before 2015, 250, 

8 ‘‘(B) in the case of returns and statements 

9 relating to calendar year 2015, 100, 

10 ‘‘(C) in the case of returns and statements 

11 relating to calendar year 2016, 50, and 

12 ‘‘(D) in the case of returns and statements 

13 relating to calendar years after 2016, 20.’’. 

14 (c) RETURNS FILED BY A TAX RETURN PRE15 PARER.— 

16 (1) IN GENERAL.—Subparagraph (A) of section 

17 6011(e)(3) is amended to read as follows: 

18 ‘‘(A) IN GENERAL.—The Secretary shall 

19 require that— 

20 ‘‘(i) any individual income tax return, 

21 and 

22 ‘‘(ii) any return or statement under 

23 subpart B, C, or E of part III of this sub24 chapter, 


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1 which is prepared by a tax return preparer be 

2 filed on magnetic media. The Secretary may 

3 waive the requirement of the preceding sentence 

4 if the Secretary determines, on the basis of an 

5 application by the tax return preparer, that the 

6 preparer cannot meet such requirement based 

7 on technological constraints (including lack of 

8 access to the Internet).’’. 

9 (2) CONFORMING AMENDMENT.—Paragraph (3) 

10 of section 6011(e) is amended by striking subpara11 graph (B), and by redesignating subparagraph (C) 

12 as subparagraph (B). 

13 (d) EFFECTIVE DATES.—The amendments made by 

14 this section shall apply to returns the due date for which 

15 (determined without regard to extensions) is after Decem16 ber 31, 2014. 

17 SEC. 12. INCREASED REAL-TIME FILING. 

18 (a) ACCELERATED FILING OF FORMS W–2 AND W– 

19 3.— 

20 (1) IN GENERAL.—Section 6071 is amended by 

21 redesignating subsection (c) as subsection (d), and 

22 by inserting after subsection (b) the following new 

23 subsection: 

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1 tions 6051 and 6052 shall be filed on or before February 

2 15 of the year following the calendar year to which such 

3 returns relate.’’. 

4 (2) CONFORMING AMENDMENT.—Subsection (b) 

5 of section 6071 is amended by striking ‘‘subparts B 

6 and C’’ and inserting ‘‘section 6053 and subpart B’’. 

7 (3) EFFECTIVE DATE.—The amendments made 

8 by this subsection shall apply to returns and state9 ments relating to calendar years beginning after the 

10 date of the enactment of this Act. 

11 (b) ACCELERATED FILING FOR CERTAIN FORMS

12 1099.— 

13 (1) IN GENERAL.—Subsection (c) of section 

14 6071, as amended by subsection (a), is amended— 

15 (A) by striking ‘‘WAGE INFORMATION’’ in 

16 the heading and inserting ‘‘WAGE INFORMA17 TION AND FORMS 1099–MISC’’, and 

18 (B) by inserting ‘‘, and any return which 

19 is filed on Form 1099–MISC,’’ after ‘‘6052’’. 

20 (2) CONFORMING AMENDMENT.—Subsection (b) 

21 of section 6071, as amended by this Act, is amended 

22 by striking ‘‘section 6053 and subpart B of part III 

23 of this subchapter’’ and inserting ‘‘subpart B of part 

24 III of this subchapter (other than returns filed on 

25 Form 1099–MISC)’’. 


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1 (3) EFFECTIVE DATE.—The amendments made 

2 by this subsection shall apply to returns relating to 

3 calendar years beginning after December 31, 2014. 

4 (c) STUDY REGARDING ADMINISTRATIVE IMPLEMEN5 TATION.—Not later than January 1, 2017, the Secretary 

6 of the Treasury shall report to the Committee on Finance 

7 of the Senate and the Committee on Ways and Means of 

8 the House of Representatives including— 

9 (1) a recommendation of whether the due dates 

10 for filing Forms W–2 and W–3 with the Internal 

11 Revenue Service and the Social Security Administra12 tion should be accelerated to January 31 to match 

13 the due date for furnishing copies of such forms to 

14 the recipient of the reported income, 

15 (2) recommendations for processes— 

16 (A) to match the information reported on 

17 Forms W–2 and Forms 1099–MISC for the ef18 fective processing of returns and accurate deter19 mination of refunds, and 

20 (B) to correct errors on such documents, 

21 and 

22 (3) any other recommendations such Secretary 

23 may have for accelerating information reporting, in24 cluding the identification of any other forms that 


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1 should be due on an accelerated schedule in order to 

2 prevent tax refund fraud. 

3 SEC. 13. LIMITATION ON MULTIPLE INDIVIDUAL INCOME 

4 TAX REFUNDS TO THE SAME ACCOUNT. 

5 (a) IN GENERAL.—Not later than 180 days after the 

6 date of enactment of this Act, the Secretary of the Treas7 ury shall issue regulations that restrict the delivery or de8 posit of multiple individual income tax refunds from the 

9 same tax year to the same individual account or mailing 

10 address. 

11 (b) EXCEPTION.—The regulation promulgated under 

12 subsection (a) shall provide that the restrictions shall not 

13 apply in cases and situations where the Secretary of the 

14 Treasury determines there is not a likelihood of tax fraud. 

15 SEC. 14. IDENTITY VERIFICATION REQUIRED UNDER DUE 

16 DILIGENCE RULES. 

17 (a) IN GENERAL.—Subsection (g) of section 6695 is 

18 amended by adding at the end the following new sentence: 

19 ‘‘Such due diligence requirements shall include a require20 ment that such preparer verify (in such manner and with 

21 such documentation as the Secretary shall provide) the 

22 identity of the taxpayer with respect to such return or 

23 claim for refund.’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to returns or claims for refund 

3 filed after December 31, 2014. 

4 SEC. 15. REPORT ON REFUND FRAUD. 

5 Not later than 1 year after the date of the enactment 

6 of this Act, and annually thereafter, the Secretary of the 

7 Treasury (or the Secretary’s delegate) shall report to the 

8 Committee on Finance of the Senate and the Committee 

9 on Ways and Means of the House of Representatives on 

10 the extent and nature of fraud involving the use of a mis11 appropriated taxpayer identity with respect to claims for 

12 refund under the Internal Revenue Code of 1986 during 

13 the preceding completed income tax filing season, and the 

14 detection, prevention, and enforcement activities under15 taken by the Internal Revenue Service with respect to such 

16 fraud, including— 

17 (1) the development of fraud detection filters 

18 and how they are or may be updated and improved; 

19 (2) the effectiveness of fraud detection activi20 ties, and the ways in which such effectiveness is 

21 measured; and 

22 (3) the methods by which such Service cat23 egorizes of refund fraud, and the amounts of fraud 

24 that are associated with each category. 

Æ 


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