Taxpayers will be "trusted customers" when they file their tax returns next year.
That's how the Internal Revenue Service and its state tax and private sector Security Summit partners are approaching the 2017 filing season. The group, which discussed upcoming security measures at a press conference Nov. 3, says the filing process next year will focus on and expanded features that will help ensure the authenticity of the taxpayer and the tax return.
Added filing security features: As with 2016, the IRS says taxpayers will not even be aware of many of the new features. However, the upgraded security process will help Security Summit members identify and stop fraudulent identity theft returns.
The new or expanded features for 2017 that the IRS says will protect taxpayers and the tax system include:
- New data elements (37 new next year) will be transmitted by the tax industry with every tax return, providing additional information to strengthen the authentication that the 1040 is being filed by the real taxpayer.
- The tax industry will go beyond individual taxpayer protections, extending more data share items (32 in all) with the IRS and states to enhance identity theft protections to business filers.
- 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.
- Private sector partners are enhancing efforts to identify the "ultimate bank account" to ensure that the refunds go into the true taxpayers' financial accounts instead of into those opened by tax refund criminals.
- The IRS' Form W-2 Verification Code initiative that debuted in connection with 2 million forms last year will expand to 50 million in 2017. This process requires the entering of a 16-digit verification code when prompted by tax software, used by both individuals and tax professionals, to validate the information on the W-2. The IRS plans to eventually expand the verification code requirement to all W-2 forms.
- The software industry will continue to enhance software password requirements for individuals and tax professional users. So have those driver's licenses and prior tax forms handy!
The IRS and its Security Summit partners are confident that that these "trusted customer" features, taken together, will help federal and state tax collectors do an even better job of detecting fraudulent returns and protecting taxpayers.
Based on 2016 tax fraud success: The upcoming filing season enhancements to fight tax identity theft are built, says the IRS, on the agency's 2016 accomplishments.
Security Summit initiatives put in place in 2016 had a dramatic impact on the collective ability to identify and stop fraudulent returns. IRS data show decreases, several dramatic, in identity theft attempts because of the group's efforts, including:
Identity theft affidavits fell sharply. The number of people who filed affidavits with the IRS saying they were victims of identity theft was cut almost in half during the first nine months of this year compared to 2015. The number of new affidavits filed through September 2016 was 237,750 compared to 512,278 for that same time period in 2015.
More fraudulent returns stopped before processing. IRS statistics show a notable drop in the number of fraudulent returns that made it into the IRS tax processing systems, a sign that Summit efforts are working up front in the tax process. Through September of this year, the IRS stopped 787,000 confirmed identity theft returns, totaling more than $4 billion. For the same nine-month period in 2015, the IRS stopped 1.2 million confirmed identity theft returns, totaling about $7.2 billion.
Fraudulent refunds fell. The number of bank partners grew to 620 institutions from 514 institutions in 2015, enabling internal processes to continue improving. As those participants increased, the number of suspect refunds stopped by banks and returned to the IRS dropped to 108,539 in 2016 compared to 243,361 in 2015. Again, this demonstrates the Summit's improved ability to stop fraudulent returns before refunds are paid. The dollar amount of suspect refunds dropped to $239 million from $829 million in 2015.
Shared information stopped more bad returns. Industry and state partners provided information that helped improve IRS fraud filters and stop additional bad tax returns, including 57,000 that would have bypassed IRS processing filters without Summit assistance.
Shared data elements helped identify new areas. Several new data elements shared on tax returns from Summit partners helped the IRS stop over 74,000 suspicious returns, representing over $372 million in refunds that were prevented from being paid.
That's a lot of numbers, both in amounts of stopped tax ID theft and associated refund fraud dollars.
Fewer filers hassling with stolen IDs: But the data point that caught my eye was the fewer number of real, legitimate taxpayers who so far this year have had to cope with the tax implications of identity theft.
Only 237,750 people had to file Form 14039, Identity Theft Affidavit, to alert the IRS of questionable activity in their tax account.
I am so sorry for those 237,750 people who had to go through the hassle of proving they are the legit taxpayers due the refund money from their accounts. But their smaller number is good progress and earns this week's By the Numbers honors.
Here's hoping that one day the number will be 0.
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