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US Tax Agencies, Industry To Tackle ID Fraud In 2017

by Glen Shapiro,, New York

04 November 2016

The Internal Revenue Service, state tax agencies, and the tax preparation industry are to work together to make further inroads against identity fraud and fraudulent tax returns in 2017.

The plans were announced as part of the Security Summit, which brings together the three stakeholders. In 2016, their collective efforts brought about positive change, including preventing fraudulent returns from entering tax processing systems.

It was pointed out, for example, that the number of new people reporting stolen IDs on federal tax returns has fallen by more than 50 percent during the first nine months of this year compared with 2015, with nearly 275,000 fewer victims compared to a year ago.

"We've made remarkable progress this year in our efforts to protect taxpayers following the unprecedented coordination with the states, the tax industry, and the financial sector," said IRS Commissioner John Koskinen. "Working together, this coalition has expanded its activities in many different areas, and we are focused on strengthening our systems and processes even more for the upcoming tax season."

The Summit's focus in the upcoming 2017 tax season will revolve around "trusted customer" features that will help ensure the authenticity of the taxpayer and the tax return - before, during, and after a tax return is filed. Additional protections will build on the 2016 successes that prevented fraudulent returns and protected tax refunds.

New data elements transmitted by the tax industry with every tax return will be further updated and expanded. In all, 37 new data elements will be added for 2017, providing additional information to strengthen the authentication that a tax return is being filed by the real taxpayer.

The tax industry will also share with the IRS and states 32 data elements from business tax returns – extending more identity theft protections to business filers as well as individuals.

In addition, more than 20 states are working with the financial services industry to create their own version of a program that would allow the industry to flag suspicious refunds before they are deposited into taxpayer accounts. In addition, the Form W-2 (Wage and Tax Statement) Verification Code initiative started by the IRS last year will expand to 50m forms in 2017 from 2m in 2016.

As part of that effort, the Summit partners will launch a new Identity Theft Tax Refund Fraud Information Sharing and Analysis Center. This project, in its initial stages for 2017, will serve as an improved early warning system, identifying emerging ID theft schemes and quickly sharing that information among Summit partners, so that all of the participants can enact safeguards.

TAGS: individuals | compliance | tax | business | tax compliance | law | Internal Revenue Service (IRS) | tax authority | United States | tax breaks | standards | services | Tax

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