written by Kami Bailey

In the last four years, the IRS has identified 19 million suspicious returns and prevented the issuance of around $60 billion in fraudulent refunds. Preventing identity theft is an ongoing process as criminals continue to find new ways of stealing personal information.
After the breach of one of the IRS’s popular online apps by hackers in 2015, the IRS has promised more identity theft protections for the 2016 filing season. The IRS and other partners in the tax preparation community have identified and tested more than 20 new data elements on returns to help prevent identity theft-related filings.

It is important for tax payers to note that many of these tax-related identity theft issues occur early in the filing season. These hackers will file bogus returns early so taxpayers remain unaware they are even victims until they try to file their return and find out one has already been filed.

New protections

Over the last year the IRS has been working with the return preparation community and the tax software industry to develop a coordinated response to tax-related identity theft. They have been focusing on improved validation of the authenticity of taxpayers and the information on the returns, increased information sharing, as well as a more sophisticated threat assessment and strategy development to improve fraud detection and prevent potential risks.

In 2016, the IRS will have new data elements that will be shared at the time of filing with the IRS to help them authenticate a taxpayer’s identity. There are more than 20 new data components that will be submitted electronically with the return to the IRS. Some of these data elements are:

  • Reviewing the transmission of the tax return, including the improper or repetitive use of originating internet addresses.
  • Reviewing the time it takes to complete a tax return, to detect computer mechanized fraud.
  • Capturing metadata in the computer transaction that will allow review for identity theft-related fraud.

The IRS will also be limiting the number of direct deposit refunds to a single account or pre-paid debit card to three. All subsequent valid refunds will be converted to paper checks and be mailed to the taxpayer.

As the IRS continues to find new and different ways to prevent tax-related identity theft, it is also important for you as the taxpayer to be aware of these issues and be cautious with your personal information.

If you have any questions about tax-related identity theft, please contact our office 417-881-0145.