The IRS has announced it is collaborating with tax preparation and software firms, payroll and tax financial product processors and state tax administrators to combat identity theft and refund fraud, a long-standing problem for the agency.
The agency said it reached an agreement with these parties to identify new steps to validate taxpayer and tax return information at the time of filing, and to increase information sharing between industry and governments.
It said the agreement would result in standardized sharing of suspected identity fraud information and analytics from the tax industry to identify fraud schemes and locate indicators of fraud patterns, and that collaborative efforts could continue going forward.
Working groups formed via a security summit in March have been working on ways to validate the authenticity of taxpayers and information included on tax return submissions, information sharing to improve detection and expand prevention of refund fraud, and threat assessment and strategy development to prevent risks and threats, according to the agency.
It said the groups agreed to use new data elements for authentication, review the use of IP addresses to, for example, detect whether multiple returns are originating from a single IP, consider the time it takes for a return to be completed to weed out automated fraud, share fraud leads, and better educate taxpayers on how to protect themselves.
Many major system and process changes will be made this summer and fall by the participants in order to be ready for the 2016 filing-season, said the IRS.
