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
Tagged accountants in Maumee, accountants in Toledo, accountants maumee, articles on fraud, cpa firms toledo, fraud, fraud prevention, fraudulent tax return, fraudulent tax returns, identity fraud articles, identity theft tax return, irs fraud, irs tax fraud, irs tax return fraud, maumee accountants, maumee cpa, maumee cpa firms, ohio department of taxation, personal identity theft, tax fraud identity theft, tax return fraud, toledo cpa, toledo cpas, william vaughan, william vaughan company
For the 2011 filing season, the Treasury Inspector General for Tax Administration (TIGTA) estimated that identity-theft-related fraud accounted for approximately 1.5 million tax returns in excess of $5.2 billion.
While the new movie Identity Thief portrays a story of humor, it also emphasizes just how serious a problem this has become. Many of us have been victims of identity theft on a small scale, unfortunately, some on a larger scale. The scam seems pretty obvious- employee information is stolen or sold to the perpetrator, and they file the return claiming a refund earlier than the “actual” person. How easy is that? When the “actual” person files their return they are then assumed to have filed the illegal or incorrect return because a refund has already been issued using their social security number and wage information.
It is nearly impossible to untangle any type of problem with the IRS, let alone trying to get your money back when they already paid it to someone else and they say that you do not exist. It is interesting that the article references the many filters that the Internal Revenue Service has for returns that are filed to prohibit something like this from happening. However, they also say that there was “a single address that was used to file 2,137 tax returns for $3.3 million in refunds.” REALLY? What kind of filters are they using at the IRS to miss that one? OR “590 tax refunds totaling more than $900,000 were deposited into a single bank account.”
These seem like easy catches. How could the same bank account be used for almost 600 refund checks? With technology as sophisticated as it is, a refund issued to a duplicate bank account should be an easy one to catch and stop immediately. The key here is to stop it before it gets to the IRS. How can we as your tax preparer help keep it from getting that far?
Rest assured that we take every step to protect your vital information such as:
- Shredding all papers, nothing goes in the garbage can
- Utilizing encryption procedures, especially when sending client information to a third parties like bankers or attorneys
- Constant communication with clients about phishing schemes that we become aware of.
- Mandatory use of anti-virus and security software on all firm computers
- Utilizing paperless technology whenever possible to deliver returns to our clients (publishing to the portal)
- Stressing to clients that the IRS does not initiate contact with taxpayers by email to request personal or financial information.
We will do our part, but you also have to help protect your personal information with the normal safeguards. Don’t be one a victim of identity theft- whether on a small or grand scale- it can take countless hours of your time and dollars paid to professionals to reclaim who you are.
By: Jennifer Kinzel, CPA, CMA, CGMA
Posted in Fraud & Forensics, Tax
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I fear my identity has been stolen. I received a letter from the IRS stating I filed more than one tax return. What should I do now?
If you have ever thought this, or if you received a letter from the IRS stating you have a balance due, refund offset or have had collection actions taken against you for a year you did not file or you received wages from an employer you were not employed by, the IRS recommends a few steps be taken.
You or your accountant should respond immediately to the IRS. Normally, a letter from the IRS will have contact information listed on it. Contact that number or the IRS to ensure the letter is legitimate. (On a side note, remember, the IRS does not send out unsolicited emails asking for personal or financial information.) It is also encouraged to contact the IRS at the Identity Protection Specialized Unit (1-800-908-4490) if you are at risk due to a lost or stolen purse or wallet, questionable credit card activity or credit report, etc. Finally, the IRS recommends you fill out Form 14039 “Identity Theft Affidavit”. The form is not very extensive; one could have the form filled out and sent into the IRS in a matter of minutes.
If you fear your identity has been stolen, act immediately. Contact the IRS and your accountant as soon as possible.
By: Ryan Leininger, CPA
Posted in Fraud & Forensics
Tagged accountants in Maumee, accountants in Toledo, accountants maumee, cpa toledo, identity scams, identity security, identity theft, identity theft problems, identity theft scams, identity theft tax return, internal revenue forms, internal revenue service forms, internal revenue tax return, irs identity theft 2012, irs tax return, maumee cpa firms, personal identity theft, reporting id theft, scams alert, tax questions answered, toledo cpas, william vaughan, william vaughan company
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