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E-filing still on the increase, but there is a downside

The IRS announced today that e-filing by business increased significantly this year. Nearly 8 million corporations and partnerships now file their tax returns online. This is about 625,000 more than a year ago, bringing the total percentage of businesses that e-file to 77 percent.

The e-filing rate for individuals is even higher. In the 2015 filing season, the percentage of individuals who e-filed was 85 percent.

In this post, however, we will also take note of a dark downside of the e-filing ascendancy: the association e-filing often has with tax refund fraud.

On one level, it is entirely understandable that the IRS seeks to encourage e-filing. After all, filing electronically seems to hold out the promise of technological efficiency, an end to otherwise endless piles of paper in IRS offices across the country.

There is, however, also a downside. The very ease allowed by e-filing has made it more difficult to reign in the problem of tax refund fraud involving identity theft.

If you are tricked into giving out personal information, the person who stole your identity can apply for and receive a tax refund by e-filing before you even know it. In many cases, the fraud isn't discovered until you try to claim your own refund.

This type of fraud has been a major ongoing problem for years. The IRS has not been able to solve it, but has begun a program offering a PIN to certain taxpayers.

The PIN option is available to taxpayers who have been the victims of tax refund fraud. The IRS also offers it to taxpayers who live in certain areas - namely Florida, Georgia and the District of Columbia - known for high levels of tax refund fraud.

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