Agencies Are Putting Their Employees at Risk for Tax Fraud, Senators Say

Federal employees are increasingly vulnerable to identity theft due to agency delays in submitting pay data to the appropriate tax agencies, according to Senate Finance Committee leaders.

Committee Chairman Orrin Hatch, R-Utah, and ranking member Ron Wyden, D-Ore., wrote a letter this week to the four federal payroll processing centers to voice their concerns. The delays in providing information to the Internal Revenue Service and state tax agencies open the window for tax return fraud and identity theft, the lawmakers warned.

The IRS and state agencies have boosted coordination to prevent any fraudulent activities, the senators said, but that objective is impossible without the timely delivery from employing agencies of all the information necessary to complete a W-2 form for all employees. It can also create delays in feds receiving their tax refunds, as state tax agencies are “unable to tell whether a tax return is stating correct or fictitious wage and withholding information.”

Some state agencies have reported to the finance committee that federal payroll processors never filed employee-specific information at all, while others said they failed to do so in a timely manner.

“At a time when identity-theft related tax refund fraud has reached epidemic levels, the federal government should be doing all it can to ensure the integrity of the tax administration process, both at the state and federal levels,” Hatch and Wyden wrote.

They added the risk was heightened due to the recent data breaches of feds’ personnel and background investigation data.

The senators asked the Agriculture Department’s National Finance Center, the Pentagon’s Defense Finance and Accounting Service, the Interior Department’s National Business Center and the General Services Administration’s National Payroll Branch to spell out exactly when their agency clients provided data for each employee’s W-2 form, what data was missing and whether the processing centers reached out to the agencies to fill the gaps. They also asked when the W-2s were sent to the Social Security Administration and state tax agencies, or for an explanation if they were never sent.

(Image via Nadya Lukic/Shutterstock.com)