The last thing any tax practitioner wants to worry about is having to fight tax return fraud, and yet, the IRS is warning taxpayers and their preparers that this year may be the worst, ever for fraud.
Over the next few months, approximately 150 million Americans will complete and file state and federal tax returns. For most families, this is a time to take stock of their finances, pay off some debts or put aside a portion of their refund for savings or future expenses. For others, it’s a chance to travel or make an important purchase. No matter how people use their tax refund, this enormous distribution of tax dollars represents a major economic event each year.
Last year, a record 109 million federal filers received refunds totaling more than $125 billion, with state refunds estimated at nearly $50 billion. These refunds give many families their largest “paycheck” of the year, and provide the broader economy with a significant increase in both savings and consumption.
However, with the rise in identity theft throughout the economy, this is also a time when the Internal Revenue Service and state departments of revenue receive a record number of fraudulent tax filings. Armed with the stolen personal financial data of thousands of Americans, large numbers of criminals pose as legitimate taxpayers in an attempt to steal tax refunds. These are serious crimes that continue to warrant – and receive – a strong and determined response from both government and industry alike.
Last spring, the IRS brought together state tax officials and the nation’s leading tax return preparers and software developers, including Intuit, to create and agree on new anti-fraud measures to protect taxpayers. The IRS Security Summit produced new agreements and launched new initiatives that are in place for the current tax season, as part of a long-term collaboration to drive fraud out of the tax system.
The Security Summit established new protocols to help governments and the tax preparation industry better detect and combat tax refund fraud. These concerted efforts are intended to authenticate legitimate returns without unnecessarily delaying the timely refunds of deserving taxpayers.
Importantly, Security Summit participants agreed to continue collaborating on the best uses of technology, protocols and cybersecurity frameworks to protect the nation’s tax information technology infrastructure. The centerpiece of that long-term effort will result in the creation of a national Information Sharing and Analysis Center (ISAC) within the IRS to collect and analyze aggregate tax return data gathered by the government, tax preparers and various technology industries.
Finally, to create greater vigilance, the IRS, the states and industry leaders have also embarked on a broad, public information campaign to help inform taxpayers about how to better protect their sensitive personal, tax and financial data. For instance, by coupling strong and unique passwords on personal accounts with methods of authentication, we can help stop fraudsters from committing identity theft and falsely applying for tax refunds.
As the IRS further noted, “This particular effort illustrates how government and the private sector can work together toward a shared goal while maintaining clear lines of distinction between the roles they play in the tax ecosystem. Industry is providing essential help by sharing key information. This will allow the government to quickly and accurately make determinations of what is fraudulent and what is not. This doesn’t change the roles we have traditionally played. It simply extends the current relationship to better protect taxpayers and the integrity of our entire tax system.”
Without question, advances in technology and data storage have helped simplify and improve our lives in countless ways. Our challenge today is to protect and secure our nation’s information and systems – and taxpayers as well – against international criminals, fraudsters and other wrongdoers.
From government and industry, to every business and individual in the country, each of us plays a role in combatting fraud. This is especially true at tax time, when some 90 percent of Americans file their taxes electronically.
Intuit® believes each of us has a special responsibility to help combat tax fraud. With everyone doing their part, we believe this is a fight that can and will be won.
Editor’s note: This is an OpEd that was featured in Politico on Jan. 26 in support of the ongoing fight against tax fraud. It is part of a continuing series of OpEds that Intuit periodically publishes on public interest issues.