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House passes proposal to stiffen tax-return fraud penalties

The U.S. House of Representatives recently passed a crime bill proposed by Florida Congresswoman Debbie Wasserman Schultz. She introduced a bill that would increase penalties for those convicted of tax-return fraud.

Law enforcement officials say that tax-return fraud involves identity theft and the filing of false tax returns. A person's Social Security number is obtained and then used to file a false return and collect a refund check from the federal government.

Orlando police told a newspaper that they refer complaints to the Internal Revenue Service.

Wasserman Schultz's proposal would make tax-return fraud a form of aggravated identity theft, adding five years in prison per ID theft.

This bill is yet another example of Congress proposing laws that increase penalties. Increased penalties are in reality unnecessary because of the extremely harsh punishment already present in federal criminal law. In reality, those that steal personal identity to file false tax returns violate the existing laws on numerous occasions by filing many false returns. The potential punishment is already more than sufficient to imprison those convicted for many years.

Politicians often seek to curry voter favor by increasing punishment which is already more than sufficient. The passage of a law to increase punishment is meaningless when Congress fails to properly fund the IRS Criminal Investigators who look for those who violate the existing laws. Representatives should address the underfunding of IRS criminal investigators whose numbers are far below those from the mid 1990s. If Congress does not properly fund the IRS Criminal Investigation Division, the number of investigators will drop to the levels not seen since the 1970s. To stop fraudulent returns based on identity theft, Congress must realize that an increase in already harsh punishment is meaningless unless there are sufficient IRS criminal investigators to find those that violate existing laws. Punishment is possible only after investigation and successful prosecution.

A person investigated for tax-return fraud could also face allegations of computer fraud, wire fraud, credit card fraud, forgery, mail fraud or other white-collar crimes. Because investigations of suspected financial crimes can be lengthy and complex, they can also involve inquiries that alert a suspect to ongoing scrutiny of their activities. In some cases, law enforcement officials will ask to search premises, or will ask to interview a suspect.

Before agreeing to those kinds of requests and others, a person should discuss their rights with an attorney experienced in allegations and investigations of these types.

People who speak with prosecutors or police without legal counsel run the risk of inadvertently giving incorrect answers to crucial questions, misunderstanding detailed questions about complicated areas of law or having their responses misconstrued by investigators. All of those possibilities can be damaging to a defendant in court.

Source: Orlando Sentinel, "Congress cracking down on tax-refund fraud," William E. Gibson, Sept. 9, 2014

Source: Reuters, "Exclusive: IRS enforcement agent numbers could drop to lowest levels since 1970s," Nadia Damouni, Aug. 25, 2014