Senator Bill Nelson (D-FL) spoke during a March 20 hearing of the Senate Finance Subcommittee on Fiscal Responsibility and Economic Growth. The focus of the hearing was on identity theft (ID) and the strategy of many thieves who request fraudulent tax refunds.

Florida has been prominent in the ID tax fraud cases. Sen. Nelson stated, "Instead of stealing cars or selling illegal drugs, more and more criminals are looking with envy at the ease with which tax fraud can be committed anonymously. All the fraudster has to do is file a false return electronically and then have the tax refund loaded onto a prepaid debit card."

IRS Deputy Commissioner for Services and Enforcements Steven Miller indicated that the IRS discovered approximately $14 billion in 2011 fraudulent refund requests. At least $1.4 billion of this amount involved identity thieves. During the past four years, over 460,000 taxpayers have been impacted by identity theft.

The Federal Trade Commission (FTC) also has reported increasing numbers of identity theft cases. During the past five years, identity theft has become a greater problem than credit card fraud. By 2011, there were 39,000 cases of credit card fraud but 67,200 cases of identity theft.

Tampa, Florida Police Department Detective Sal Augeri testified at the hearing. He stated, "Criminals are stealing hundreds of millions of dollars from hard-working Tampa taxpayers and I'm only aware of what's going on here in Tampa."

Augeri explained that tax fraud is a nationwide issue. He also observed that the IRS was "of little assistance in these investigations" because it is not permitted to transfer information to local police.

The hearing was conducted to discuss a bill sponsored by Sen. Nelson. The Identity Theft and Tax Fraud Prevention Act is designed to "give the IRS and identity theft victims the means to better detect and prevent this disastrous offense."

The bill would increase penalties for identity theft, allow the IRS to share information with state and local authorities, secure the Social Security numbers of deceased Americans, allow identity theft victims personal identification numbers or permit them to opt out of electronic filing of tax returns.

National Taxpayer Advocate Nina Olson spoke at the hearing and urged caution. She stated that we also need to protect taxpayer privacy. Olson pointed to the ability of a taxpayer to consent to disclosure of returns by the IRS so that information can be transferred to state or local law enforcement authorities. She stated, "Under this exception, the IRS may develop procedures that would facilitate sharing of identity theft information with state and local law enforcement agencies."