IRS tax refunds face growing risk from identity thieves, GAO warns

Posted at 5:17 PM, Feb 11, 2015
and last updated 2015-02-12 09:56:40-05

Increasing cyber threats from hackers, failures to address veterans’ health care, and emerging threats of tax refund fraud from identity thieves got the most attention from Congress in a hearing about the Government Accountability Office’s most recent “high risk” list.

The list, issued once every two years, calls out federal government programs that are most susceptible to fraud, waste, abuse, mismanagement, and those most in need of transformation. The 2015 report named 32 government programs as “high risk,” two more than in the previous report.

Resolving the issues “has the potential to save billions of dollars, dramatically improve services to the public and instill better trust and confidence in the federal government,” said Comptroller General Gene Dodaro, who heads the GAO.

The report outlined growing concerns that the Internal Revenue Service is susceptible to fraud from identity thieves, noting that the agency paid out an estimated $5.8 billion in fraudulent tax refunds during the 2013 tax season. Thieves filed fraudulent returns using a legitimate taxpayer’s identifying information and claimed the refunds. Typically in these cases, the IRS pays out refunds months before receiving the salary data from employers that would allow them to check the fraudulent claim information against real salaries. 

Senator Claire McCaskill (D-Missouri), said pushing up the deadline so salary information gets to the IRS earlier could combat the fraud and should not be difficult to implement.  

The 2015 report also warned of government-wide threats from hackers interested in stealing other personal information about citizens stored in federal computers.

Dodaro testified to the Senate Committee on Homeland Security and Governmental Affairs that security incidents at federal agencies have doubled during the last five years.

The GAO added the Veterans Administration to its high risk list for 2015, citing how more than 100 of its recommendations to the V.A. to improve the health care of veterans in America have not been implemented.

“Make no mistake, extremely troubling issues have come to light regarding the VA,” said Sen. Tammy Baldwin (D- WI). “I believe Congress is going to have to act in a variety of ways to make improvements.”

Since the GAO began issuing the reports in 1990, more than one-third of the areas previously designated as high risk have been removed from the list following progress from the government.  While no trouble area was removed from the high risk list in this year’s report, the GAO noted that some agencies made significant progress from previous years.

“FDA has greatly improved its oversight of medical device recalls,” the report noted.

Dodaro also testified that he sees the Department of Homeland Security as a model agency that is making formal plans to address problems as it works to get off the high risk list. Dodaro said other agencies could follow suit. 

“Most of this stuff, except maybe for NASA, is not rocket science,” he said.

Mark Greenblatt can be reached at You can also follow updates  on Twitter @greenblattmark