by:Giselle C. Alexander, J.D., LL.M., C.P.A.
Filing income tax returns is never fun. It becomes even more frustrating when your expected refund is held up due to an identity thief filing a false return and claiming a refund on your behalf. As identity thieves have become more sophisticated, using techniques such as routing refund deposits directly to prepaid debit cards, resolution for innocent taxpayers seems to crawl at the pace of a sloth, with the typical case taking 180 days to resolve. As of January 7, 2016, the I.R.S. has approximately 1,700 open investigations. Recognizing the frustration and harm suffered by taxpayers, the I.R.S. has prioritized its efforts against refund fraud, working with both state departments of revenue and private industry.
These efforts include:
- Reviewing the transmission of the tax return, including the improper and/or repetitive use of internet protocol numbers;
- Capturing metadata in the computer transaction that will allow review for identity theft related fraud;
- Limiting the number of direct deposit refunds to a single financial account or prepaid debit card to three; and
- Working with tax return preparation software providers to enhance identity requirements and stronger validation procedures for both new and returning customers.
As of October 20, 2015, 34 state departments of revenue and 20 tax industry members are parties to memorandums of understanding with the I.R.S. regarding shared responsibilities, duties, and information sharing processes to better serve taxpayers. Additional states and industry leaders are expected to sign memorandums in coming months. Security Summit work groups continue to collaborate on additional ways to prevent refund fraud, inform taxpayers of preventative measures, and improve information sharing between federal and state agencies to better apprehend thieves. By filing season 2017, the Information Sharing and Analysis Center Sub-Group plans to be operating, further improving collaborative efforts between federal and state agencies to prosecute identity thieves.