" By late 2012, the IRS assigned more than 3,000 IRS employees - over double from 2011 - to work on identity theft-related issues and the IRS has trained 35,000 employees who work with taxpayers to recognize identity theft indicators and help people victimized by identity theft.
While the moves are significant, many think the agency is paddling against a tsunami with a canoe.
In Sept. 30, 2012, the IRS had identified almost 642,000 incidents of identity theft that impacted tax administration in 2012 alone, an almost three-fold increase over 2011 and a rate almost six times (47,730 incidents) that of 2008 when the fraud was initially tracked, according to a Government Accountability Office report.
IRS officials told the GAO that one of the challenges they face in combating identity fraud is its changing nature of the crime and how it is concealed. For example, IRS officials described several areas where the extent and nature of identity theft is unknown.
According to the GAO there are other issues:
" The IRS does not know the full extent of the occurrence of identity theft. Officials said that they count the refund fraud cases that IRS identifies but that they do not estimate the number of identity theft cases that go undetected.
" Identity of the thieves. Unless IRS pursues a criminal investigation, IRS generally does not know the real identity of the thieves.
" Whether a fraudulent return is an individual attempt or part of a broader scheme. Identifying new schemes or significant cases, such as one thief using numerous taxpayer identities, depends on analysts noticing patterns or other indications that a few cases may be part of a larger scheme. As a result, some schemes or cases involving multiple taxpayers may go undetected.
" Characteristics of known identity theft returns. IRS officials told us that the agency does not systematically track characteristics of known identity theft returns, including the type of return preparation (paid preparer or software), whether the return is filed electronically or on paper, or how the individual claimed a refund (check, direct deposit, or debit card).
" IRS captures data on the amount of money it recovers from all types of fraudulent returns, but it does not distinguish whether the type of fraud was identity theft or some other type of fraud. In some cases, external entities, such as banks or other agencies, may notify IRS of potential refund fraud, including suspected identity theft-based refund fraud. IRS reported it had received information from 116 banks and external leads on more than 193,000 accounts between Jan. 1 and Sept. 30, 2012, for all types of refund fraud. IRS reported that banks and other external entities returned almost $754 million during this period.