Tax fraud season is coming up and the Internal Revenue Service has a new plan for fighting taxpayer identity theft and fraudulent tax returns in 2016.
The IRS worked with income tax professionals to identify dozens of new data points on tax filings that will be used in next year’s system to prevent fraudulent tax refunds from being paid.
The new system will rely more on the sharing of information between private businesses that do tax preparation work, state revenue departments and the IRS.
The new tax fraud detection will collect and share tax filing information in real time so that suspicious tax filings can be flagged and caught faster than in previous years.
Some of the new identity theft safeguards include:
- Extra monitoring of tax returns that are submitted online, including unauthorized or repetitive use of the computer IP address that filed the return.
- Monitoring the computer identification information that is associated with the filing.
- Recording the time it takes to complete a tax filing from start to finish to determine if tax filings are being computer generated and filed automatically.
- Recording the metadata from online filings that shows signs of fraud and identity theft.
In addition, companies that make tax-prep software have agreed to beef up validation and password requirements for users.
Passwords on tax filing systems and software will need to be at least eight characters long, using a combination of uppercase and lowercase letters, numbers and some special characters.
Logon validation will include three security questions and will include a new feature that will set a limit for the number of logon tries that a person is allowed before they are locked out by the system.
Companies that build and sell tax filing software have also agreed to notify users about any changes that are made to their accounts or if multiple tax returns are filed with the same Social Security number.
However, tax prepares still will not be responsible for closing accounts that are used for filing fraudulent tax returns. The Internal Revenue Service and state revenue divisions are still the ones responsible for validating the returns and deciding which returns to accept and reject.
This new fight against identity theft by the IRS comes on the heals of a scandalous 2015 tax season that saw a dramatic surge in fraudulent tax filings; phone scammers pretending to be IRS agents and a massive IRS security breach that involved the theft of personal information for hundreds of thousands of people in the United States.