The IRS announced progress June 28 by its "Security Summit" and other initiatives in reducing identity theft refund fraud.
The IRS's Identity Theft Victim Assistance function had 48% fewer Forms 14039, Identity Theft Affidavit, and other "receipts" of taxpayer correspondence relating to identity theft since the beginning of 2016 than in the same period last year. This was a result of a concerted effort, the IRS said, among it, state tax authorities, and private industry executives, including the Security Summit, which was first convened in March 2015. The partnership, with several subgroups including one for preparers, will continue permanently. Its projects include a new Identity Theft Tax Refund Fraud Information Sharing and Analysis Center, a clearinghouse for sharing information about and combating trends in identity-theft-related tax fraud.
In addition, a successful pilot program involving an added layer of protection for Forms W-2, Wage and Tax Statement, will be expanded, the IRS announced. The forms bear a 16-digit verification code that is entered on the tax return to confirm the integrity and accuracy of electronically filed returns. The new feature required support from payroll service providers and the software industry. The pilot involved 2 million Forms W-2, which will be increased to 50 million for the 2017 filing season.
Another major initiative is to educate the tax preparer community. This is not an enforcement operation, IRS Commissioner John Koskinen stated, but is intended to be supportive and helpful. Identity thieves looking for new ways to gain access to taxpayer data have been increasingly focusing on tax return preparers, he said.
Other reported new measures and improvements include:
- Tax software providers have instituted more uniform requirements of stronger passwords and security questions.
- Software providers have shared confidential data elements from tax returns with the IRS and states to help identify possible fraud.
- Industry partners performed regular reviews to identify possible identity theft schemes and report them to the IRS and state partners to help stay on top of emerging schemes.
- Summit partners launched a "Taxes. Security. Together." campaign to increase public awareness about the need for computer security and to provide people with tips on how to protect their personal information.
IRS News Release IR-2016-94 and Fact Sheet FS-2016-21
—By Sebastian B. Murolo, CPA, MBA, an assistant professor at Queensborough Community College, Bayside, N.Y.