Taxpayer ID Protection and Fraud Prevention Act

To amend the Internal Revenue Code of 1986 to require that certain tax refunds be made by electronic funds transfer, and for other purposes. 1. Short title This Act may be cited as the Taxpayer ID Protection and Fraud Prevention Act 2. Income tax refunds with respect to electronically filed returns required to be made by electronic funds transfer (a) In general Section 6402 (n) Refunds To be made by electronic funds transfer (1) In general Except as otherwise provided in this subsection, any refund or payment made by the Secretary under this title with respect to an income tax return which is filed electronically shall be made by electronic funds transfer. (2) Exceptions The Secretary may, based on standards developed by the Secretary, waive the application of paragraph (1) to refunds or payments— (A) to persons or classes of persons for whom compliance imposes a hardship, including persons who do not have access to any of the methods by which the Secretary makes payments by electronic funds transfer (including bank accounts, prepaid debit cards, Direct Express Cards, digital wallets, and any other secured electronic payment method as may identified by the Secretary), and (B) in other circumstances as may be necessary. (3) Regulations The Secretary shall issue such regulations or other guidance as may be necessary to increase the percentage of refunds and payments made by electronic funds transfer, including regulations or other guidance which— (A) requires recipients of refunds or payments required to be made by electronic funds transfer to— (i) designate one or more financial institutions or other authorized agents to which such payments shall be made, and (ii) provide information necessary for such recipient to receive such refund or payment by electronic funds transfer, and (B) ensures that persons required to have an account at a financial institution under subparagraph (A) because of the application of paragraph (1)— (i) will have access to such an account at a reasonable cost, and (ii) are given the same consumer protections with respect to such account as other account holders at the same financial institution. . (b) No inference with respect to form of electronic funds transfer Nothing in the amendment made by this section shall be interpreted to restrict the form of electronic funds transfer by which the Secretary of the Treasury, or his designee, may make refunds or payments. (c) Effective date The amendment made by this section shall apply to refunds and payments made after December 31, 2019. 3. Refunds to prepaid debit cards, Direct Express cards, etc The Secretary of the Treasury, or his designee, shall— (1) to the maximum extent practicable, allow income tax refunds to be made by electronic funds transfer to prepaid debit cards, Direct Express cards, digital wallets, and any other secure electronic payment method as may be determined by the Secretary, (2) ensure that taxpayers are aware of the various methods referred to in paragraph (1) by which taxpayers may received income tax refunds by electronic funds transfer, and (3) revise references in materials provided to taxpayers (including income tax returns and instructions) to ensure that the various accounts to which refunds may be made are referenced, not simply checking and savings accounts. 4. Report on implementation of requirement that all income tax refunds be made by electronic funds transfer Not later than the date which is 1 year after the date of the enactment of this Act, the Secretary of the Treasury, or the Secretary’s delegate, shall submit a written report to Congress describing how the Secretary would implement a requirement that all income tax refunds be made by electronic funds transfer. Such report shall include any legislative recommendations that the Secretary may have with respect to the implementation of such a requirement. 5. Decrease in return threshold for requiring electronic filing (a) In general Section 6011(e)(2)(A) 250 25 (b) Effective date The amendment made by this section shall apply to returns the due date for which (determined without regard to extensions) is after December 31, 2018. 6. Modification of earliest date on which credits or refunds in connection with child tax credit and earned income tax credit are made (a) In general Section 6402(m) the 15th day of the second month the 1st day of the third month (b) Effective date The amendment made by this section shall apply to credits or refunds made after December 31, 2018. 7. Annual report on improper payments The Secretary of the Treasury, or the Secretary’s delegate, shall annually submit a written report to Congress which identifies the aggregate amounts of improper payments made by the Internal Revenue Service. Such report shall separately state the aggregate amount of such payments by relevant subcategories. Such subcategories shall include underpayments, overpayments, payments attributable to identity theft, payments attributable to mis­i­den­ti­fi­ca­tion other than identity theft, payments attributable to other fraud, and such other subcategories as the Secretary determines would be useful. 8. Public-private partnership to address identity theft The Secretary of the Treasury (or the Secretary’s delegate) shall work collaboratively with the public and private sectors to protect taxpayers from identity theft refund fraud. 9. Recommendations of Electronic Tax Administration Advisory Committee regarding identity theft refund fraud The Secretary of the Treasury shall ensure that the advisory group convened by the Secretary pursuant to section 2001(b)(2) of the Internal Revenue Service Restructuring and Reform Act of 1998 (commonly known as the Electronic Tax Administration Advisory Committee) studies (including by providing organized public forums) and makes recommendations to the Secretary regarding methods to prevent identity theft refund fraud.

Summary: Taxpayer ID Protection and Fraud Prevention Act This bill amends the Internal Revenue Code to establish or modify various requirements related to protecting taxpayer identities and filing tax returns electronically. The bill requires: tax refunds for electronically filed returns to be made by electronic funds transfer with certain exceptions; the Internal Revenue Service (IRS), to the maximum extent practicable, to allow income tax refunds to be made by electronic funds transfer to prepaid debit cards, Direct Express cards, digital wallets, and other secure electronic payment methods; the IRS to report to Congress annually on improper payments made by the IRS; the IRS to work collaboratively with the public and private sectors to protect taxpayers from identity theft refund fraud; and the Department of the Treasury to ensure that the Electronic Tax Administration Advisory Committee studies (including by providing organized public forums) and makes recommendations to Treasury regarding methods to prevent identity theft refund fraud. The bill also: decreases from 250 to 25 the minimum number of tax returns a taxpayer must be required to file during the year to allow the IRS to require electronic filing, and changes the earliest date on which credits or refunds may be made for the child tax credit or the earned income tax credit to the 1st day of the third month (currently the 15th day of the second month) following the close of the taxable year.