Internal Revenue Service (IRS), state tax agencies and industry partners recently finalized plans for 2017 to improve identity theft protections for individual and business taxpayers after making significant inroads this year against fraudulent returns.
For the 2017 filing season, the IRS and Summit partners will take additional actions. As with 2016, many of the new features will not be visible to taxpayers but will provide the IRS and states with the information they need to identify and stop fraudulent identity theft returns.
Among the new or expanded features for 2017 that will protect taxpayers and the tax system:
* New data elements transmitted by the tax industry with every tax return have been 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 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.
* More than 20 states are working with the financial services industry to create their own version of a program that allows the industry to flag suspicious refunds before they are deposited into taxpayer accounts.
Also, private sector partners are enhancing efforts to identify the “ultimate bank account” to ensure that the refunds go into the true taxpayers’ accounts — not fraudsters.
* The Form W-2 Verification Code initiative started by the IRS last year will expand to 50 million forms in 2017 from 2 million in 2016.
When completing a tax return, the 16-digit verification code should be entered when prompted by tax software used by both individuals and tax professionals to validate the information on the Form W-2. The IRS anticipates the verification code will be expanded in future years for all Forms W-2.
* The software industry will continue to enhance software password requirements for individuals and tax professional users — providing additional safety prior to filing.
Taken together, these “trusted customer” features will help the IRS and states do an even better job of detecting fraudulent returns and protecting taxpayers.
As part of that effort, the Summit partners will launch a new Identity Theft Tax Refund Fraud Information Sharing and Analysis Center, or ISAC.
This project, in its initial stages for 2017, will serve as an improved early warning system — identifying emerging identity theft schemes and quickly sharing that information among Summit partners so that all of the participants can enact safeguards.
Summit partners believe an ISAC ultimately promises significant gains in detecting and preventing identity theft refund fraud and will provide better data to law enforcement to investigate and prosecute identity thieves.
This effort will provide all Summit partners with a threat assessment capability, early warnings about problems and insights about identity theft fraud schemes through nimble and agile information sharing.
Education Campaign
The Security Summit will continue its campaigns to increase awareness about data security to both taxpayers and tax preparers.
Last year, the Summit partners launched the “Taxes. Security. Together.” campaign to encourage taxpayers to take greater data security precautions and to learn how to recognize and avoid phishing emails that seek to trick people into providing sensitive data such as Social Security or credit card numbers.
This year, the Summit partners expanded the campaign to include tax professionals, who increasingly are being targeted by criminal syndicates. Summit partners initiated a new campaign called “Protect Your Clients; Protect Yourself” and urge tax professionals to use the best security practices available.
Tax professionals should review Publication 4557, Safeguarding Taxpayer Data, to see an action check-list for ensuring data security.
As tax season approaches, the IRS and Summit partners will share more tips for tax professionals in upcoming weeks. And for taxpayers, the “Taxes. Security. Together” campaign will resume for a second year in the weeks leading up to the opening of the 2017 filing season in January with important information that taxpayers can use to protect their sensitive taxpayer and financial data.
© 2016 Daily Herald under contract with NewsEdge. -.
