Tax refund fraud has become a growing concern for taxpayers, state and local governments, and the federal government. Tax departments are implementing strategies to prevent and detect for the 2015 tax season.
The Ohio Department of Taxation (ODT) is implementing additional safeguards this tax season that will delay state tax refunds. The ODT is anticipating an increase in identity theft directly affecting tax fraud.
Last year, ODT stopped an unprecedented number of fraudulent income tax returns seeking to steal refunds totaling more than $250 million. In previous years, attempted tax fraud averaged roughly $10 million.
In order for the ODT to detect refund fraud due to identity theft, an additional up-front filter will now be applied to all tax refund requests to examine the demographic information reported on a return. This examination will then assign a “probability of fraud” factor that will determine how the return is then further processed by ODT.
If a return is pulled for review, ODT’s additional security measures will require some taxpayers to successfully complete an Identification Confirmation Quiz before the return will continue to be processed. If a taxpayer’s return is selected for identity confirmation they will receive a letter from ODT directing them to http://www.tax.ohio.gov. This will provide access to the quiz and detailed instructions on how to complete it. Taxpayers without access to the Internet will be directed to call ODT at 1-855-855-7579.
Processing of returns for refunds will be delayed due to these additional screening and security measures. According to the ODT, electronic returns requesting a refund may take up to 15 days to be direct deposited and paper returns could take up to 30 days for a physical check to be mailed out.
Not only is the ODT taking aggressive action on identity theft and tax fraud but so is the Internal Revenue Service (IRS). For 2015, the IRS is introducing new procedures which will address some of the issues. Effective 2015 tax season, the IRS is limiting the number of refunds directly deposited into a single financial account or onto a prepaid debit card. Therefore, any of the subsequent refunds will be issued by paper check and mailed to the taxpayer. Exceptions will not be made.
Visit the Taxpayer’s Guide to Identity Theft for helpful tips to protect yourself from identity theft or fraud.
By: Aubrey Forche, Staff Accountant
Posted in Fraud & Forensics, Tax
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Identity theft is on the rise and escalating to new levels. Some time ago as individuals we knew where we should and should not leave our personal information and who we should be sharing it with and when not to. More recently there has been a growing fear of identity theft by cyber criminals as a result of technology and the internet. As consumers we have become extremely cautious about security even down to what we carry in our wallet and how we go about completing transactions; now our security can even be compromised while interacting on the Internet.
In the past, the primary sources of information stolen while interfacing on the web were an individual’s name, social security number, date of birth, and/or credit/debit card numbers. Nowadays these criminals are going as far as falsifying electronically filed tax returns. According to the Federal Trade Commission, cyber criminals steal a driver’s license or an official form of identification in an individual’s name but with the criminal’s picture on them. They also use an individual’s name and social security number to get government benefits, and to file fraudulent tax returns. These cyber criminals receive refunds in the form of checks or government approved debit cards which are many times delivered to vacant homes.
Unfortunately the victim of tax fraud is often unaware of the crime until they file their own tax return. Once the taxpayer and the IRS investigate the matter it is obvious that fraudulent activity has taken place. In many of these cases the fraudulent tax return is very hard to trace, so the IRS is not only paying the criminal but rectifying the legitimate tax return for the actual taxpayer.
According to Daily Tech, as of now the IRS is dealing with 2.6 million cases of fraudulent returns for 2011. The IRS seems to be reacting to tax return fraud by significantly changing their technology and increasing their staff to prevent, detect, and deter tax fraud. In 2011, the IRS was able to prevent or stop approximately 1.3 million fraudulent claims. Thus, the changes the IRS has made seem to be effective. Keep in mind that fraudulent returns are created from criminals who stole your information somewhere else; the IRS has secure channels for electronically filing tax returns.
Be proactive as a taxpayer and do what is possible to minimize the risk of falling victim to identity theft.
- Protect your social security number
- shred sensitive information before you dispose of it
- be aware of the sites used on the internet
- select difficult passwords and log-in information
- verify sources before giving out information
- protect your purse and wallet, and use secure locations for personal information.
Tax returns supply some of this sensitive information therefore use reputable sources and trusted individuals. Be aware of the signs of identity theft and monitor your financial and annual credit reports. Many individuals have also invested in identity theft insurance which will not stop identity thieves from trying, but will help minimize the victim’s liabilities and losses. Identity theft can cause substantial losses in some cases and can take some individuals years to recover from, which is very unfortunate. For further information, The Federal Trade Commission offers great advice under “Fighting Back Against Identity Theft.”
By: Aubrey Forche, Accountant
Posted in Fraud & Forensics, Tax
Tagged accountants in Maumee, accountants in Toledo, companies in toledo, cyber criminals, cyber identity theft, cybercriminals, fraud, fraudulent tax return, fraudulent tax returns, identity security, identity theft, identity theft tax return, internet fraud, irs tax return fraud, maumee cpa firms, personal identity theft, tax return fraud, website identity information, william vaughan, william vaughan company