IRS touts progress against taxpayer identity theft

The Security Summit strategy built on 2015 gains, stopping still more fraudulent returns in 2016 and 2017, the Service says.
By Sebastian B. Murolo, CPA

The Security Summit strategy built on 2015 gains, stopping still more fraudulent returns in 2016 and 2017, the Service says.

The IRS highlighted progress made in its Security Summit, a partnership with the tax industry and state tax authorities to combat tax-related identity theft. In a news release issued in October 2017, then-IRS Commissioner John Koskinen said that since the Security Summit began in March 2015, the number of identity-theft-related tax returns had fallen by about two-thirds, indicating that its measures were deterring criminals.

Some of the summit's highlighted accomplishments included:

  • In calendar year 2016, the IRS stopped 883,000 confirmed identity theft returns, a 37% drop from 2015. During the first eight months of 2017, the IRS said, it stopped 443,000 confirmed identity theft returns, a 30% decline from the same period in 2016.
  • Financial firms stopped 124,000 suspected fraudulent refunds in 2016, which was a 50% decline from 2015, and 127,000 returns in the first eight months of 2017.
  • The number of reported identity theft victims fell to 376,000 in 2016, a 46% decline from 699,000 in 2015. Through August 2017, 189,000 taxpayers had reported they were victims of identity theft during the year, which was a 40% drop from the same period in 2016.

The IRS also expanded for the 2018 filing season use of a new verification code on Forms W-2, Wage and Tax Statement, to about 66 million Forms W-2 bearing the 16-character code. Taxpayers preparing their own returns and tax professionals are urged to enter the code if present.

The summit partners will continue to implement new information-sharing procedures, the IRS said.

The IRS also highlighted new protections for business taxpayers. Generally, more questions will be asked to ensure a business return is legitimate. They include:

  • Were estimated taxes paid? If so, how much?
  • The name and Social Security number of the company individual authorized to sign the business return.
  • Parent company information, if applicable.
  • Filing history — has the business filed Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return; Form 941, Employer's Quarterly Federal Tax Return; or other business-related tax forms?
  • Additional information, based on deductions claimed.

The IRS warned all tax and payroll professionals and entities holding personally identifiable information to be especially alert to cybercriminals impersonating clients to attempt to steal the information. The IRS further urged tax professionals to perform due-diligence steps regarding email requests for personal information and to watch out for phishing emails. The IRS said it will also continue its ad campaigns and education outreach, "Don't Take the Bait," aimed at warning tax preparers about various phishing scams.

  • News Release IR-2017-176

—By Sebastian B. Murolo, CPA, an assistant professor, Queensborough Community College, CUNY in Bayside, N.Y.

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