Drake Software blog for tax pros, covering tax, IRS news, and more

Progress Noted on ID Theft Front in 2017

Progress Noted on ID Theft Front in 2017

For John Koskinen and the members of the Security Summit, it’s been a pretty good year. Koskinen, the commissioner of the IRS, joined the Security Summit this week in praising the advances made in the fight against identity theft, while laying the groundwork for the 2018 filing season.

IRS data shows significant improvement as fewer identity theft returns entered the tax system; fewer fraudulent returns were issued; and fewer taxpayers found themselves victims of identity theft.

The Security Summit, a working partnership between the IRS, state tax agencies and tax industry leaders, has also led to stronger federal and state tax systems with important new protections for taxpayers.

“We’ve made tremendous progress since the Security Summit partnership held its first session in 2015,” said Koskinen. “We’ve seen the number of identity theft-related tax returns fall by about two-thirds since 2015. This dramatic decline helped prevent hundreds of thousands of taxpayers from facing the challenges of dealing with identity theft issues. This reflects the unique collaboration between the tax industry, the states and the IRS. But we have much more work facing us. As we evolve, so do the cybercriminals here and abroad. We must constantly be on guard.”

Koskinen’s term as IRS commissioner comes to an end in November. He convened the first gathering of the Security Summit members in 2015, ushering in a combined task force to combat identity theft and identity-theft-based tax refund fraud.

The IRS Fights Back

Working together, the IRS and the Security Summit have come up with some pretty significant upgrades for the American income tax system. The tax industry now shares dozens of important data points from returns that help the IRS and the states identify potential identity theft fraud. Password protocols have been enhanced on both individual and tax professional software. Various state tax agencies have joined with financial institutions to create their own programs to identify suspect refunds.

The IRS, meanwhile is moving ahead with its pilot program using a Form W-2 Verification Code that verifies income information and employers.

By the Numbers

Among the highlights seen by the IRS since 2015:

  • Confirmed identity theft returns declined. In calendar year 2016, the IRS stopped 883,000 confirmed identity theft returns, a 37 percent drop in confirmed identity theft returns from 2015. During the first eight months of 2017, the IRS has stopped 443,000 confirmed identity theft returns, a 30 percent decline from same time last year.
  • Financial firms also stopped suspect refunds. Financial institutions stopped 124,000 suspect refunds in 2016, a 50 percent decline from 2015. Financial institutions have stopped 127,000 suspect refunds so far this year, which in part reflects a handful of cases involving several thousand accounts.
  • Identity theft victim numbers fell substantially. The number of people reporting that they were victims of identity theft fell to 376,000 in 2016, a 46 percent decline from 699,000 in 2015. This year the strong trend line has continued through August: 189,000 taxpayers have reported themselves as victims of identity theft, which is down approximately 40 percent from the same time last year.

Bob Williams

Forget genes; I’ve got words in my DNA. Communication has been part of who I am nearly all my life. From a long career in radio news to another one in newspapers – and a University of Georgia journalism degree sandwiched between the two – language has been my life. I’ve also been fortunate to have learned the tax business from the ground up here at Drake, starting with 1040.com online forms some years ago before moving on to work on the Web. In all things tax-ish, we aim to give you tools you can use.