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Expect Security Standards for Tax Preparers Next Season: Koskinen

We’ve come a long way in the fight against identity theft, but we can’t let up now.

That was the bottom line from IRS Commissioner John Koskinen to the IRS Security Summit members June 28 in Washington. Koskinen praised the group for the measures that have already been put in place, and outlined new steps that will be put in place for the next filing season.

One effort will be directed toward the 700,000 income tax preparers in the U.S., largely in the form of an education campaign.

“We’re very concerned that identity thieves, in their never-ending hunt for taxpayer data, are turning their attention more and more to focus on tax return preparers,” Koskinen said. “We already saw some evidence of this during the last filing season. So our subgroup devoted to tax professionals is already hard at work identifying the steps we can take to help return preparers safeguard their own information and their clients’ data.”

The commissioner also said the IRS is expanding its W-2 Verification Code project, which ran as a pilot project this year. The pilot installed a 16-digit alphanumeric code on some 2 million W2s; the code was entered by taxpayers and tax preparers when prompted by their tax software.

Verification codes help check the information on the W-2 at the point of filing, and prevent fake W-2s from being generated by scammers. The IRS expects 50 million W-2s to carry a verification code in 2017.

The Security Summit Group is made up of representatives from the tax industry, the software industry and state tax commissioners. And Koskinen credits them with bringing a wider view to the fight against identity theft and tax fraud. As an example, the commissioner says information from the banking industry and other partners helped the IRS modify their internal fraud filters, stopping about $50 million in fraudulent refunds from going out.

“There also have been other indicators showing we’re moving in the right direction. For example, the number of people who have filed affidavits with us to tell us they were victims of identity theft has dropped significantly in the first half of this year compared to the first half of 2015 – it’s down more than 40 percent,” said Koskinen.

This year through April, Koskinen says the IRS stopped over $1 billion in fraudulent refunds claimed by identity thieves on more than 170,000 tax returns. That’s $250 million more blocked than last year.

“But as I’ve said many times, there can’t be any let-up in this fight. Refund fraud caused by identity theft is a serious and complicated threat that continues to grow. Criminals – many of them sophisticated, organized syndicates – are redoubling their efforts to gather personal data to file fraudulent federal and state income tax returns, hoping to find new ways to slip through our fraud filters and steal refunds.”

Koskinen and the IRS will outline more security plans for 2017 at the upcoming Nationwide Tax Forums, slated for Chicago, New Orleans, Washington, D.C., Orlando and San Diego.

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