Tag Archives: tax return fraud

Protect yourself from Tax Refund Fraud

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.

tax-fraudLast 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

 

Fraud Knowledge & Prevention

With so many fraud cases in the spotlight recently it’s hard to figure out how to protect yourself. There have been many cases of credit card fraud, employee embezzlement, money laundering and so much more. With companies losing astronomical sums to fraud every year this begs the question: what steps are being taken to prevent fraud in the future and learn from past mistakes?

identity-theftTop in the news lately is the recent identity theft at Target. It has not yet been released exactly how this theft occurred but, generally, thieves are able to hack into a company’s databases and steal the information transmitted from a credit card’s metal strip when swiped on a card reader. Because of this, millions and millions of people are put on alert every year that their credit and debit card accounts have been compromised.

Another large fraud area is financial statement fraud; the examples that people first relate to are usually Enron and WorldCom. This fraud is often hard to detect because it is usually perpetrated by the company’s’ executives in an effort to report a better financial position than actually exists. This type of fraud is usually meant to deceive stockholders, owners, investors, banks, etc.

Small-scale fraud is most typically dealt with in companies. For instance, maybe “borrowing” $100 out of the petty cash drawer and paying it back on pay-day. Or maybe even forging an invoice so that the employee can collect the extra payment. There are several different ways that employees can embezzle money from their employers and thieves are getting more and more creative. Small-scale fraud like this is most often caught by the employer themselves so managers and supervisors need to be vigilant in taking note of this happening and ensuring that a swift punishment is delivered.

What steps are in place to avoid these frauds happening in the future? Credit card information theft is on a steep decline in Europe. Why? Because they have shied away from using metals strips in credit and debit cards and have, instead, an electronic chip embedded into them. The current stripe technology used in the United States is outdated; it remits the same information at the point of sale every time the card is swiped. The chip is state of the art and every time the card is swiped information is encrypted and as a result the information remitted is constantly changing. Fear not, chip technology is coming! The US will soon be adopting the chip technology and has a 2015 implementation deadline.

As a result of the large financial statement frauds committed in the past, financial reporting is much more regulated. Transparency is the name of the game and auditors are now required to do much further testing and disclose much more than they were pre-Enron.

Simple checks and balances and a segregation of duties is the most effective way of preventing and detecting small-scale fraud. Think about it, it’s much easier form someone to steal money from a company if they process invoices, approval invoices, and write checks vs. a different people being responsible for each job. In some companies it may not make financial sense to separate these positions (the company may be too small) so companies should do a cost/benefit analysis to determine their best practices.

Our firm also offers a FREE service to our clients called End Fraud Now. This service provides an anonymous and confidential way for employees and other business partners to report internal theft, bribery, harassment, and other illegal activities that could cause a loss to your company or subject it to legal exposure.  Check out the website today!

The moral of the story is that fraud is out there and everyone needs to not only be aware of it but actively preventing it. The government is stepping in and putting safeguards in place but that doesn’t mean that businesses shouldn’t be doing things independent of this. Putting a small amount of internal controls in place will save a company future time, energy, and money.

Courtney Elgin, CPA

Cybersecurity Breach: How To Protecting Yourself

Just type in the words “cyber security” as an internet search and the volume of current news stories is painfully obvious. With the holidays coming to a close and online sales up between 10-15% compared prior years, cyber security is an issue that is truly at the forefront for many businesses. A recent article from USA Today says that 3 out of 4 companies that were attacked in 2012 were organizations with 100 or fewer employees.

It seems as though every day another security breach makes the news. Many well-known companies such as Apple, Facebook, and The New York Times, even federal government agencies have been in the headlines as victims to cyber crimes this year. More recently, Target announced that the debit and credit card information of 40 MILLION shoppers had been stolen in a three week period. Should we just go back to using cash?

This is such a significant topic for business owners and consumers alike because business today is conducted online. If you don’t have an online presence as a business owner, you are living in the stone age. As a consumer, your shopping habits could be labeled as “antiquated” if you don’t conduct even a small portion of your shopping online.

shutterstock_133098560As a business owner, you are responsible for protecting your employee’s, your customer’s and your own financial and sensitive business information. As a consumer, you can take small measures to ensure your security. Here are a few of the most basic rules every business and individual can and should be following to help protect confidential information:

• Don’t respond to popup windows telling you to download anything
• Don’t allow websites to install software on your device
• Don’t reply to unsolicited emails
• Use screen locks, log off the system when not in use, and shut off your computer at the end of the day
• Ensure that your computer hardware and software are updated regularly on all devices
• Control physical access to computers and networks
• Make certain that Wi-Fi networks are secure
• Change passwords regularly and use firewalls to protect your systems
• Back up your data on a regular basis so that if anything is compromised, you have a copy.
• Make sure that employees have and know the rules about cyber security and safe social media practices

Don’t assume that your business cannot be targeted because it is too small, and on individual terms, don’t assume that your information cannot be obtained because you “don’t shop online that much”. Be prepared!

By: Jennifer Kinzel, CPA, CMA

Tax Return Fraud & Identity Theft: Are YOU Safe?

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