Closely Held Business Advisor: IRS Addresses Identity Theft at Security Summit

What You Need to Know

On June 28, 2016, the IRS met with members of the Security Summit to review their accomplishments from the 2016 filing season and to establish their goals for 2017 season with respect to identity theft.

Previously, in March 2015, the IRS partnered with state tax agencies and leaders in the private-sector tax industry to create the Security Summit. The mission of this public-private partnership is to combat tax-related identity theft.

During the 2016 filing season, the Security Summit partners focused on three key areas:

  • Authentication – information sharing and cybersecurity centered on developing methods to validate the authenticity of taxpayers
  • Information Sharing – improving detection and expanding prevention of fraudulent tax refunds
  • Threat Assessment – developing strategies to prevent cybersecurity risks and threats

According to IRS Commissioner John Koskinen, the Security Summit had a substantial impact on curbing stolen identity refund fraud:

  • From January through April 2016, the IRS stopped $1.1 billion in fraudulent refunds claimed by identity thieves on more than 171,000 tax returns. Last year, the IRS blocked $754 million in fraudulent refunds claimed on 141,000 returns for the same time period.
  • Industry partners flagged 36,000 suspicious returns worth $148 million in claimed refunds from January through May 2016. The IRS suspended these returns for further review. If the tax industry partners had not marked them as suspicious, these returns would have passed through IRS processing filters.
  • Since January 2016, the IRS Identity Theft Victim Assistance function experienced a sizeable decline of 48% in receipts, which included Identity Theft Affidavits (Form 14039) filed by victims.
  • The number of refunds that banks and financial institutions returned to the IRS because they appeared suspicious fell by 66 percent.
  • The Security Summit launched an awareness campaign targeted towards the payroll industry, human resources and tax preparers. The campaign alerted them of emerging scams in which the criminals either posed as company executives to steal employee Form W-2 information or used technology to gain remote control of preparers’ office computers.

As the Security Summit prepares for the 2017 filing season, their new initiatives include:

  • Expanding a W-2 Verification Code test to cover approximately 50 million forms in 2017.
  • Identifying additional data elements from tax returns that will help improve authentication of the taxpayer.
  • Launching the Identity Theft Tax Refund Fraud Information Sharing & Analysis Center to serve as the early warning system for partners by collecting and analyzing tax-related identity theft schemes.
  • Expanding the “Taxes. Security. Together.” awareness campaign to ensure that tax preparers have the information they need to protect themselves from cyberattacks and safeguard taxpayer data.
  • Creating a process for financial institutions to identify questionable state tax refunds and return them to states for validation. Twenty-three states have signed on.

We Can Help

The IRS and its Security Summit partners are working diligently to fight tax-related identity theft; however, identity theft remains a threat to all taxpayers. If you have questions about how to safeguard your company’s tax information or your personal tax information, please contact your Elliott Davis Decosimo representative.