There is no chance that federal lawmakers will take up tax reform before the first session of the 113th Congress ends. But that Capitol Hill reality hasn't stopped Senate Finance Committee Chairman Max Baucus, D-Mont., from sharing changes he thinks need to be made to our tax system.
Baucus has released a discussion draft of tax-change proposals he says would make tax filing safer, simpler and more efficient. The document addresses key tax problems faced not only by taxpayers but also by those who administer the tax laws.
The official draft prepared in legislative format is 64 pages long. Baucus' overview covers nine pages.
However, he did also issue a one-pager of his proposed changes. I'm presuming the shortest document contains what Baucus considers to be the most pressing tax issues.
So let's start with a topic covered there: tax-related identity theft.
Growing tax fraud problem
Many tax officials, including Acting Internal Revenue Service Commissioner Daniel Werfel, have acknowledged that tax fraud committed by crooks using stolen identities of legitimate taxpayers is a major problem.
Baucus notes in his proposal that a Treasury Inspector General for Tax Administration, or TIGTA, report found it takes the Internal Revenue Service an average of more than 400 days to resolve a tax identity-theft-fraud case.
The IRS has increased its efforts in processing and more closely examining suspected false returns and in criminal investigations of such crimes.
In response to TIGTA's latest examination, the IRS said it plans to expand antifraud measures this coming filing season. Note to readers: This means it probably will take longer for your legitimate return to be processed and any refund issued.
Baucus tax-fraud proposals
Baucus also wants to help in this effort and offered some suggestions:
- Stop including a taxpayer's full Social Security number on W-2 forms. Instead, the IRS could allow use of only a truncated Social Security number or other taxpayer identification number on such informational forms.
- Tighten access to the Social Security Administration's public death data, also known as the Death Master File. This should cut down on a common tax identity theft scheme in which a crook uses the tax ID information from recently deceased taxpayers to file fake refund-producing returns.
- Grant the IRS authority to use the Department of Health and Human Services' National Directory of New Hires to verify employment data. This should help the agency catch false income and taxes withheld amounts reported on fraudulent returns.
- Require the IRS to notify taxpayers if it determines that they are identity theft victims. The agency also would assign each victim a single point of contact to help speed up resolution of their tax ID-theft case. This should help get things straightened out for victimized taxpayers in less than the current 400 days average.
- Impose new criminal penalties for tax-related identity theft. Filing a tax return using another person's identity would be a felony subject to a fine of up to $250,000 as well as a prison term of up to five years. Even if tougher penalties don't deter crooks, knowing these criminals are doing more time is satisfying. Yes, my revenge mode kicks in when it comes to identity theft.
- All these proposals look to be pretty basic, common sensical and clear-cut ways to stop crooks from stealing taxpayer identities and money. Even if the rest of Baucus' tax reform recommendations don't get consideration from Congress, the identity-theft and tax-fraud sections should be pulled out and considered on their own.
Have you ever been the victim of identify-theft tax fraud?
Want the latest news on taxes, tax reform prospects, filing deadlines, political fights, Internal Revenue Service alerts and tax-saving tips? Subscribe to Bankrate's free Weekly Tax Tip newsletter.
- You also can follow me on Twitter: @taxtweet. Veteran contributing editor Kay Bell is the author of the book "The Truth About Paying Fewer Taxes" and co-author of the e-book "Future Millionaires' Guidebook."