This resolution of the IRS is similar to many resolutions we all make, in that they tend to be the same each year. In the IRS’s case, they seem to be making progress toward making your “tax identity” more secure. With their annual Security Summit partnership with various states, software industry leaders, and payroll and tax preparation processors, they have focused on specific areas to resolve identified issues.
Authentication is one focus with the IRS expanding its W-2 verification code pilot program from 2 million in 2015, to 50 million W-2s issued for 2016. The program adds a code to the form so that when that return is electronically filed, it provides validation of a legitimate filing. The partnership has also focused on identifying new data elements on returns that will help identify possible identify theft scams on both a corporate and individual level in a more immediate time frame.
Taxpayer awareness has been a cornerstone to this initiative, including a marketing campaign of “Taxes. Security. Together.” as well as a “Taxpayer Identity Theft Awareness Week” starting January 30, 2017. Their primary goal is to make taxpayers cognizant that their tax documents and information are valuables that should be secured at all times. Taxpayers should make sure physical copies are secure and digital copies are in locations where they are encrypted and protected by a complex password. When sharing your information with third parties, make sure you are doing so via a secure and encrypted method. Never include sensitive data in an unsecured email or text message. Also, be comfortable with whom you are sharing the data with, and that they are taking similar precautions.
They also want to raise awareness of tax scams alleging to be the IRS, pointing out that the IRS never contacts individuals via telephone or online, therefore information should never be given out to anyone contacting you by those methods.
Many of the remaining initiatives involve addressing how the financial industry and tax professionals handle current security safeguards as well as coordinated anticipation of evolving new risks. The IRS believes these ongoing efforts have led to the halting of approximately $1.1 billion in fraudulent refunds claimed in the 2016 tax season. In addition, the IRS Identity Theft Victim Assistance function reported a drop of 48% in the first half of 2016 as compared to the previous year.
All these signs are positive, but make sure you’re doing your part so both you and your “tax identity” can have a happy and secure new year!
Ray Neubauer, CPA, CGMA