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On the offensive to fight fraud in 2016 tax season

As the NBA Finals head toward game five, strong defense has been on display in several very close games. This week, the Internal Revenue Service went on the offense announcing it will coordinate with the tax preparation industry to make it harder for criminals to steal the identities and refunds of taxpayers.

Industry leaders praised the IRS for taking the lead. The changes will not create a markedly different experience for taxpayers who use tax software, because they are mostly behind the scenes.

Several months ago, federal and state tax officials formed working groups with the tax industry to address increasing phone tax scams, the theft of taxpayer identities and the filing of fraudulent returns through TurboTax. Even as the group was meeting, the federal agency was the target of hackers who were able to access and steal data from more than 100,000 past returns off the IRS website.

What will change? Here is a summary:

  1. Sharing of information will let the agency see if a return was filed from a trusted computer/internet address along with the amount of time spent on the return
  2. Stronger authentication will require more complicated usernames and robust passwords
  3. Timely sharing of data will help the agency identify suspicious returns and filing patterns

The agency will implement these changes over the summer and have them in place before the start of the 2016 tax filing season.

Several other recommendations will require Congress to step in. For example, the coalition recommended mandatory licensing for all tax preparers and an earlier due date for W-2s and other third-party forms. 

Source: CNN Money, “IRS unveils plans to prevent fraud,” Jeanne Sahadi, June 11, 2015

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