Lawmakers press Treasury, IRS witnesses after surge in stolen IRS checks; bipartisan bill would allow replacement by direct deposit

Representative Melotakis flagged a sharp local and national rise in stolen IRS refund checks and urged the committee and witnesses to prioritize payment modernization and direct-deposit options for victims. "In my district alone, 377 cases of stolen checks totaling $5,399,808," Melotakis said, and witnesses and members said national totals appeared far higher.

The Bureau of the Fiscal Service has initiated a pilot to use U.S. Postal Service tracking services to trace mailed payments; members described a bipartisan Recovery of Stolen Checks Act proposed by Rep. Melotakis and cosponsors to allow taxpayers who had checks stolen in the mail to receive replacement refunds via direct deposit.

Industry witness Minesh Ladwa argued that many advanced tax authorities globally have moved away from mailed checks toward secure digital payments and real-time refund options. "Tax agencies are phasing out checks, more and more often to move to digital based solutions, which essentially can speed up the refund process in a matter of, like, minutes or seconds with real time digital payments," Ladwa said. He also recommended machine-learning risk models and configurable rules to flag high-risk refund claims before issuance.

GAO and other witnesses recommended additional protections for unbanked taxpayers, including government-negotiated prepaid debit-card solutions and improvements to the IRSpaperless processing initiative. Witnesses cautioned that any solution must preserve safeguards against fraud while reducing the time victims must wait to recover stolen funds.

Members said modernization is not optional for payment integrity and taxpayer protection. They asked witnesses for examples and for follow-up information on pilots and technical options, and several members said they intend to advance legislation and oversight to speed implementation.