Tax Refund Fraud Declining

Identity theft is a crime that has swept the nation like a plague. All over the country, men and women have suffered at the hands of criminals who use other people’s information to steal their hard-earned money. Because the outbreak has been so severe, many people are now wary of the old tricks that the scammers use.

Tax Refund Fraud Declining

However, many people let their guard down when tax season rolls around because they are expecting to input critical information before they even start. Therefore, identity thieves consider tax time to be a great chance to score some easy money. A recent wide scale crackdown has cut the total amount of tax payer identity theft in half and has prevented millions of dollars of false tax returns.

The IRS speculates the drastic drop after comparing a number of individuals who have filed affidavits with the IRS in the first nine months of this year to a number of people who filed for them last year. In 2015, as many as 512,278 affidavits were filed, and only 237,750 were filed this year. However, that is not the only statistic that the IRS has to back up their claim. Data shows another fifty percent drop of confirmed fraudulent tax returns that get into the IRS’s tax return processing system. The number of suspicious refunds that were caught and stopped by banks and then returned to the IRS is also down by as much as half despite having more banks join in the effort to prevent this form of identity theft.

IRS Slowing Tax Refund Fraud

All the statistics above point to one possible truth. The year after the crackdown on taxpayer identity theft, the IRS is seeing less bad returns, fewer fraudulent refunds, and fewer tax payers that become a victim while trying to pay taxes.

What was the tax fraud crackdown?

The crackdown was announced last year after a year-long surge in tax related fraud. The surge in fraud also includes a breach in IRS cyber security where hackers stole as much as 39 million dollars in tax refunds after taking taxpayer information off of the IRS website.

The crackdown effort featured the sharing of information between the IRS, state tax agencies, tax preparation and filing software, private tax preparation agencies, and other related companies. After the tax preparation firms received electronic tax returns, the companies then gave the IRS their review of the transmissions. The report included information like the repetitive or improper use of internet protocol numbers and the electronic address that the tax returns were sent from. The tax preparation firms also shared other information with the IRS such as the information about the computer device identification data that was linked to the tax returns origin as well as any meta data received from the transmissions. The IRS has placed a new code on some W-2 tax returns that taxpayers use to file their federal tax returns. The new code is expected to help in the verification of the W-2’s.

The Future of Tax Fraud

The crackdown effort has developed from a mere idea to a serious attempt at cutting down on fraudulent tax refunds with real measures that make it harder for identity thieves to steal information. While the effort has been a success so far and has had real tangible progress, there are still more ideas to implement. Several new safeguards were rolled out during the 2017 tax season. The new roll outs focused on features designed for trusted customers. The new features were meant to aid in ensuring the authenticity of both the tax payer and the tax return. In total, there are as many as 37 new data elements that the tax preparation industry will transmit to the IRS from individual tax returns. These tax preparation agencies will also begin sharing 32 items of data that they collect from business tax returns with the IRS. The IRS will also place more verification codes on millions of W-2 tax reforms.

How To Prevent IRS Tax Fraud & Identity Theft

While it is wonderful that the IRS and tax preparation agencies are stepping up to protect the information of taxpayers, it is imperative to understand that they will not be able to stop every case of identity theft. It is ultimately up to the tax payers to be aware of how their information is shared and stored. IRS and tax industry officials have an information sharing and analysis center that is focused on providing citizens with early warnings for refund fraud and identity theft schemes to aid civilians to stay aware and cautious.

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