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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Many people do not know what the Internal Revenue Service Criminal Investigation (IRS-CI) unit does, or that it even exists. According to the IRS-CI annual report for fiscal year 2012, the IRS-CI mission is to “serve the American public by investigating potential criminal violations of the Internal Revenue Code and related financial crimes in a manner that fosters confidence in the tax system and compliance with the law”.
The IRS-CI was made up of 2,657 Special Agents and 1,104 professional staff as of the end of fiscal year 2012 (September 30, 2012). Investigations undertaken by this group range from identity theft, to offshore tax evasion, to money laundering, to tax treaty cases, to terrorist financing, and to public corruption to name a few.
The annual report for fiscal year 2012 highlights a few accomplishments that occurred during the fiscal year. Investigations initiated for fiscal year 2012 versus 2011 were 5,125 and 4,720 with investigation completions being 4,937 and 4,702 during the respective fiscal years. Convictions totaled 2,634 in fiscal year 2012 and 2,350 in fiscal year 2011. The percent sent to prison decreased from fiscal year 2011 to fiscal year 2012 by 0.2% to 81.5% in fiscal year 2012.
The annual report for fiscal year 2012 was released on May 10, 2013. To view the report online, click here. The report lists some general statistics, but it also lists key cases and investigations, along with the outcome. If you enjoy reading about fraud schemes and about those convicted, I encourage you to read the annual business report.
By: Ryan Leininger, CPA
Posted in Tax
Tagged accountants in Toledo, accountants maumee, ci irs, cpa toledo, criminal investigation division, criminal investigation division irs, fraud, fraud prevention, internal revenue service, internal revenue service criminal investigation, internal revenue service criminal investigation division, irs agents, irs crimes, irs criminal investigation division, irs enforcement, irs tax fraud, irs-ci, maumee cpa, maumee cpa firms, tax news, 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
Tagged accountants in Maumee, accountants in Toledo, accountants maumee, identity fraud articles, identity theft, identity theft and tax returns, identity theft on tax return, identity theft solutions, identity theft tax refund, identity theft tax return, identity theft tips, income tax identity theft, internal revenue service identity theft, irs fraud, irs identity theft, irs tax fraud, irs tax identity theft, irs tax return identity theft, maumee cpa, maumee cpa firms, personal identity theft, preventing identity theft, tax fraud identity theft, tax identity theft, toledo cpa, toledo cpas, victims of identity theft, william vaughan, william vaughan company