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IRS Says Stopping Identity Theft Is 'A Top Priority'

MAY 28, 2015

IRS Says Stopping Identity Theft Is 'A Top Priority'

DATED MAY 28, 2015
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IRS STATEMENT:

Identity theft is one of the most serious threats our tax system faces, and the IRS continues to add and strengthen protections in our processing systems to protect the nation's taxpayers. Much more work remains, but it's important to note that our actions have led to an increasing number of fraudulent returns being detected and stopped -- despite challenging budgets in recent years.

The 2013 filing season reviewed by TIGTA was a period when many of our initial improvements to detection tools and processes were being put in place, including numerous system filter refinements to protect against refund fraud and identity theft. We have made significant progress since that time, and we are glad to see that TIGTA's review reflected this first wave of improvements.

However, we remain concerned with some of the figures used by TIGTA. For example, we believe that 54 percent of their pool of more than 787,000 returns should not be considered undetected fraud, which affects the projected loss estimates. Several years ago, TIGTA projected substantial fraud losses over five years, but we have not realized these numbers in such magnitude and believe the five-year estimate they made will be significantly less than originally projected.

We catch more refund fraud on the front end before the legitimate taxpayer even files, and as such, the IRS has improved our ability to help victims and potential victims as they go through the process. We closely monitor incoming tax returns, watching for fraud indicators and adjusting our systems as necessary.

Starting this past January, the IRS limited the number of direct deposit refunds to a single financial account or pre-paid debit card to three -- limiting the number of electronic deposits a fraudster can make. We partner with financial institutions and law enforcement agencies to leverage information obtained to address this crime. And we continue to work and refine our process for identifying ITINs used for fraudulent purposes and deactivating them.

In addition to adequate funding, there are a number of legislative proposals in the Administration's FY 2016 Budget request that would also assist the IRS in its efforts to combat identity theft, including accelerating information return filing dates. Under current law, most information returns, including Forms 1099 and 1098, must be filed with the IRS by February 28 of the year following the year for which the information is being reported, while Form W-2 must be filed with the Social Security Administration (SSA) by the last day of February. The due date for filing information returns with the IRS or SSA is generally extended until March 31 if the returns are filed electronically. The Budget proposal would require these information returns to be filed earlier, which would assist the IRS in identifying fraudulent returns and reduce refund fraud related to identity theft.

Preventing and detecting identity theft and refund fraud remains a top priority for the IRS. Recent events only underscore the need to make even more improvements and further strengthen our systems.

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