(CNSNews.com) – Georgia Revenue Commissioner Douglas J. MacGinnitie testified Friday at a House Oversight and Government Affairs Subcommittee hearing on identity theft and tax fraud that his own wife’s identity was stolen two years ago.
“Personal experience showed it could happen to anybody. In 2011, after I had started my job, my wife’s identity was stolen, so when my wife and I filed our joint return, it was kicked out. Someone had already used her name and Social Security number and filed a return,” he said.
“And if that’s not the definition of irony, I don’t know what is, but we had to process paperwork both at the IRS and the state level, so I understand this both from an administrative perspective but also as a semi-victim,” MacGinnitie added.
In 2005 before MacGinnitie became commissioner, state revenue officials began seeing fraudulent returns and formed the Office of Special Investigations to fight the fraud.
MacGinnitie said officials are “very limited” in their ability “to look at a return and tell that the filer was not who they said that they were.”
“Just looking at a return doesn’t really tell you much, and our ability to access all sorts of third-party data was to a great extent, still is very limited. Taxing authorities don’t have all that information most of the time,” he said.
He said the vast majority of tax fraud involved identity theft.
“Some of the fraud was the actual taxpayer making fraudulent claims on their own tax return, but more often someone was using a legitimate taxpayer’s information and filing a fraudulent claim in their name,” MacGinnitie said.
“We started out by putting some pretty simple rules in place, I gather, much like the IRS and their filters to process those returns. So as an example, if too many refunds were going to the same bank account or the same address, we would start flagging those returns. There might be a good reason that that many were going to one address or one bank account, but there might not be, and we wanted to take a closer look,” he added.
In 2012, state officials partnered with Lexis/Nexis. After the Revenue department was done checking a return, information from every refund was sent to the company, which ran it through their databases to look for signs of identity theft.
If the refund looked suspicious, the refund was held, and a letter and email was sent to the taxpayer asking him or her to go to a website and answer questions that only the taxpayer would know, much like when a credit card is stolen. If the correct answers were given, the refund went back into the queue and was paid, MacGinnitie explained.
The process added one to five days to the process, depending on how long it took the taxpayer to receive the email or letter to the process of a refund.
“In 2012, the program stopped 44,158 refunds totaling $23,483,870,” MacGinnitie said.
“It cost us $2,604,516 ($2.5 million base fee plus, $104,516 commission).
“From a business perspective, the program is a no-brainer. We spent $2.6 million and saved $23.5 million and protected numerous taxpayers from having the hassle of dealing with us and fixing their accounts,” he said.