Identity thieves are growing more sophisticated this year, filing phony tax returns that closely mimic those of legitimate taxpayers and then depositing refunds onto prepaid debit cards that are difficult to trace, state tax authorities and fraud investigators said Thursday morning during a Congressional hearing on tax fraud and tax scams.

Local tax authorities shared details about the fraud they’ve seen this year during the hearing organized by Senate Finance Committee Chairman Sen. Orrin Hatch (R-Utah). Lawmakers and state tax authorities called for more rigorous standards for tax preparation Web sites and for a speedier income verification process at the IRS as possible solutions to help prevent tax fraud.

“These criminal acts are perpetrated by thieves hiding behind telephone lines and computers, preying on honest taxpayers and robbing the Treasury of tens of billions of dollars every year,” Hatch said in his opening statement. “This must stop.”

Along with state tax authorities, the Justice Department and the Treasury Inspector General for Tax Administration testified about the schemes they’ve seen this tax season. A surge in suspicious tax filings this year has highlighted the challenges of tax officials and private tax prep companies as they struggle to keep up with online tax criminals. The incidents raised questions about how much online tax preparation providers such as TurboTax should do to prevent fraud.

At the hearing, lawmakers and investigators said fraud is a system wide issue affecting multiple tax preparation companies. They said it can be addressed in several ways, including a faster process for verifying the information reported on tax returns, increased information sharing between the IRS and state tax authorities, and tighter security for third-party tax preparation Web sites.

In some states, there was an increase in the number of fraudulent state returns that included information from 2013 tax returns. That allowed thieves to include information that matched those of legitimate taxpayers, such as address, name and income, said John Valentine, head of the Utah State Tax Commission. In prior years, fraudulent returns typically included fabricated personal information, he said.

State tax representatives also called for strict requirements before refunds are deposited on to prepaid debit cards, which they said was the vehicle of choice for identity thieves stealing refunds. Valentine also called for added security when people opt to pay their filing fees from refunds because scammers doing that would essentially pass the cost of those fees to taxpayers.

Much of the tax refund theft that happens early every year is possible because, under current rules, there is a gap between when taxpayers can start filing tax returns and when the IRS receives matching information from employers. (The filing season typically launches in late January, but companies don’t need to report income information to the IRS until March 31.)

That means the IRS often can’t verify returns until later in the filing season, after fraudulent refunds may have already been issued,  state tax authorities said. “Often, we do get a great deal of information that we share with one another, but it is not on a timely basis,” said Mike Alley, commissioner of the Indiana Department of Revenue.

IRS commissioner John Koskinen called for an earlier reporting deadline for employers in his budget proposal, saying that it “would assist the IRS in identifying fraudulent returns and reduce refund fraud,” but such a change requires Congressional action. Koskinen has also proposed giving employers permission to “mask” a portion of their employees’ Social Security numbers on W-2 forms, which would make it more difficult for criminals who find the forms to commit identity theft.

Fraud investigators told lawmakers that scam artists are constantly finding new ways to steal refunds and to fool taxpayers into making payments to someone they believe works for the IRS.

“As the IRS continues to advance its filters, the criminals change because it’s such a lucrative environment,” said Timothy Camus, an inspector with the Treasury Inspector General for Tax Administration.