IRS, Tax Preparation Industry to Share Data in Fight Against Return Fraud

Federal and state agencies will work together to bolster protections against stolen-identity refund fraud, the Internal Revenue Service has announced.
New and expanded strategies include improved methods to validate taxpayers’ identities when they file returns. The new steps entail more sharing of data about trends in suspected identity fraud.

The announcement comes only weeks after the IRS said its “Get Transcript” online service was hacked, exposing data from more than 100,000 taxpayer accounts. The stolen data included Social Security numbers, street addresses and dates of birth.
“We’re asking every company that helps taxpayers file returns to provide us information that will add layers of security and step up their pre-refund authentication,” IRS Commissioner John Koskinen said Thursday. “We’re also making clear that companies need to let the IRS know if they detect any suspicious activity or refund fraud patterns.”
The IRS said there will be “standardized sharing” of suspected identity fraud information and analytics from the tax industry to identify fraud patterns. The agency said industry and government groups have identified several new types of data that can be shared at tax filing time to help authenticate a taxpayer’s identity and detect potential refund fraud. Those data include the Internet address and computer associated with the return, and other elements of the transaction.
So far this year, the IRS has stopped some 3 million fraudulent filings, up about 30 percent from last year, Koskinen said. States also report surges in suspicious filings.
The IRS lost more than $5.8 billion to identity-theft fraud in 2013, according to a study by the Government Accountability Office.
“This agreement represents a new era of cooperation and collaboration among the IRS, states and the electronic tax industry that will help combat identity theft and protect taxpayers against tax refund fraud,” Koskinen said. “We’ve made tremendous progress, and we will continue these efforts. Taxpayers filing their tax returns next filing season should have a safer and more secure experience.”
The tax preparation industry and government groups identified the following issues to help authenticate a taxpayer and detect identity theft ahead of the 2016 filing season. Some of these issues include, but are not limited to:

  • Reviewing the transmission of the tax return, including the improper and or repetitive use of Internet Protocol numbers, the Internet ‘address’ from which the return is originating.
  • Reviewing computer device identification data tied to the return’s origin.
  • Reviewing the time it takes to complete a tax return, so computer mechanized fraud can be detected.
  • Capturing metadata in the computer transaction that will allow review for identity theft related fraud.

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