In June, the Internal Revenue Service joined with representatives of tax preparation and software firms, tax financial product processors, and state tax administrators to announce a new collaborative effort to combat identity theft refund fraud and protect the taxpayers.
This will include validating taxpayer and tax return information at the time of filing. This effort will increase information being shared between industry and governments. There will be standardized sharing of suspected identity fraud information and analytics from the tax industry to ID fraud schemes and locate patterns according to the IRS.
According to the IRS Commissioner John Koskinen “We’ve made tremendous progress, and we will continue these efforts. Taxpayers filing their tax returns next filing season should have a safer and more secure experience.”
The IRS Commissioner convened a Security Summit on March 19th with CEOs and leaders of private sector firms, and Federal and State tax administrators to discuss ID theft and efforts to stop the fraud.
Three specialized groups were established and during these past months the teams have been working on the following initiatives:
Taxpayer authentication. The industry and government groups identified numerous new data elements that can be shared at the time of filing to help authenticate a taxpayer and detect identity theft refund fraud. The data will be submitted to the IRS and states with the tax return transmission for the 2016 filing season. Some of these issues include, but are not limited to:
- Reviewing the transmission of the tax return, including the improper and or repetitive use of Internet Protocol numbers, the Internet ‘address’ from which the return is originating.
- Reviewing computer device identification data tied to the return’s origin.
- Reviewing the time it takes to complete a tax return, so computer mechanized fraud can be detected.
- Capturing metadata in the computer transaction that will allow review for identity theft related fraud.
Fraud identification. The groups agreed to expand sharing of fraud leads. For the first time, the entire tax industry and other parts of the tax industry will share aggregated analytical information about their filings with the IRS to help identify fraud. This post-return filing process has produced valuable fraud information because trends are easier to identify with aggregated data. Currently, the IRS obtains this analytical information from some groups. The expanded effort will ensure a level playing field so everyone approaches fraud from the same perspective, making it more difficult for the perpetration of fraud schemes.
Information assessment. In addition to continuing cooperative efforts, the groups will look at establishing a formalized Refund Fraud Information Sharing and Assessment Center (ISAC) to more aggressively and efficiently share information between the public and private sector to help stop the proliferation of fraud schemes and reduce the risk to taxpayers. This would help in many ways, including providing better data to law enforcement to improve the investigations and prosecution of identity thieves.
Cybersecurity framework. Participants with the tax industry agreed to align with the IRS and states under the National Institute of Standards and Technology (NIST) cybersecurity framework to promote the protection of information technology (IT) infrastructure. The IRS and states currently operate under this standard, as do many in the tax industry.
Taxpayer awareness and communication. The IRS, industry and states agreed that more can be done to inform taxpayers and raise awareness about the protection of sensitive personal, tax and financial data to help prevent refund fraud and identity theft. These efforts have already started, and will increase through the year and expand in conjunction with the 2016 filing season.
Many system and process changes will take effect this summer and fall to be ready for 2016 filing season. This partnership will also continue as these issues are long-term.
Information gathered from IR-2015-87 June 11, 2015