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IRS Announces Progress in Collaborative Fight Against Tax Return Identity Theft

By Sally P. Schreiber, J.D.

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An IRS-led coalition is making progress in the fight against tax-return identity theft the agency announced on Tuesday (IR-2015-117, FS-2015-23). IRS Commissioner John Koskinen called the collaborative effort an “unprecedented partnership … to put strong new safeguards in place for the 2016 tax season.” That effort, known as the Security Summit, involves the IRS, leaders of tax preparation and software firms, payroll and tax financial product processors, and state tax administrators. It began in March and resulted in several recommendations in June. Three working groups were formed focusing on authentication, information sharing, and cybersecurity. Tuesday’s announcement includes the addition of other working groups.

At this date, 34 state revenue departments and 20 tax industry members have signed memoranda of understanding, and more are expected to sign later. Other participants include the Federation of Tax Administrators representing the states, the Council for Electronic Revenue Communication Advancement, and the American Coalition for Taxpayer Rights (ACTR). Interested parties are Free File Inc., the National Association of Computerized Tax Processors, the Network Branded Prepaid Card Association, and the Financial Services Roundtable.

Participants in the Security Summit also identified additional topics in June and have continued to work together to leverage their collective resources and efforts to protect taxpayers. As a result of these efforts, 20 new data components have been identified to help detect federal and state identity theft refund fraud.

Another part of the effort involves verifying taxpayer identities when using tax software, adding three security questions and device identity recognition when taxpayers log on, as well as more stringent password requirements and timed lockout. Another identification requirement includes out-of-band verification of email addresses, which sends an email or a text with a personal identification number (PIN) to the user, a step often used in the financial sector.

—Sally P. Schreiber (sschreiber@aicpa.org) is a Tax Adviser senior editor.