Published on 11/17/2015
Writtin by: Paul Bogdanoff, CPA and Tim Dages, CPA
During 2015 the Internal Revenue Service and tax preparation software companies have collaborated to develop more security measures to counteract the fraudulent refund epidemic. Bogdanoff Dages and Co., P. C. uses the tax software of one of the companies that is working with the IRS in their effort to combat individuals filing fraudulent tax returns.
According to the Treasury Inspector General for Tax Administration approximately 2.4 million taxpayers’ names or Social Security numbers were utilized in falsified returns in 2013, which represents nearly a tenfold spike from 2010. Endeavoring to curtail the increase in tax-refund fraud, the Internal Revenue Service, in association with both public and private tax administrators, developed 20 new pieces of data that will analyze 2015 tax returns. Tax preparation companies, such as BD and Co., P. C. through the utilization of tax software, will share tax information with the IRS and state tax authorities in an attempt to combat the increasing predicament that has lead to several million tax returns that were falsely filed, which represents $5.8 billion in refunds on the 2013 filed returns that were found to be fraudulent, while the IRS thwarted attempted fraud involving more than four times that amount.
In May, the IRS said that 104,000 U.S. taxpayers had their tax data stolen from the agency’s website and used the information to file some 13,000 fake tax returns that cost about $39 million in refunds. Closer to home, Indiana University, Butler University, Anthem and other local business have had the files of students, patients and customer compromised.
IRS Commissioner John Koskinen, in a recent news conference, stated that the added security measures should not involve a “sea change” for taxpayers in filing their returns electronically. A few of the changes that may be expected are the use of more rigorous passwords to access tax software, locking out users after a certain period of time or unsuccessful log-in attempts and more security prompts. “This is not a battle the IRS can fight alone,” Koskinen said of the recent security summit with industry leaders, 34 states and 20 players in the financial and tax industry that agreed to collaborate with the IRS.
Most of the “20 data components will be largely invisible to taxpayers – we’re not interested in giving criminals a road map,” Mr. Koskinen stated. “We’ll do a better job of stopping a refund before it goes out the door.” For the first time, in the coming tax-filing season, the agency will monitor whether multiple returns are filed from the same device, the length of time it takes for the forms to be completed and whether it appears that returns are automatically generated by a machine. “All of these give us a better defense against criminals trying to use stolen taxpayer information to file false returns and claim a fraudulent refund,” Koskinen said. “And we can do a better job of stopping the refund before it goes out the door.”
With these changes American taxpayers may want to budget a little more time for taxes next year. Bogdanoff Dages and Co., P. C. stands ready to assist their clients with their tax preparation needs.