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IRS, States and Tax Industry Combat ID Theft and Refund Fraud

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Identity theft and return fraud continue to be a top priority for the IRS, but never more so than this tax year.

In the first public-private partnership of its kind, the IRS, state revenue departments and private sector tax industry leaders have come together to form the Security Summit Initiative. Through the help of these three parties, there are new and innovative safeguards in place to increase the protection of taxpayers’ information and the integrity of the federal and state tax systems.

But, that’s not all! It’s truly a collective effort where you can be involved, too. Through the “Taxes. Security. Together.” campaign, the Security Summit Initiative is reaching out to taxpayers to assist in fighting against identity theft and refund fraud. The campaign urges everyone to take an active role in protecting their personal and financial information, both online and at home. With the public’s help, the Security Summit Initiative participants hope to strengthen these new security protections.

Refund Fraud Detection and Prevention

For several years, the IRS has aggressively and valiantly fought refund fraud and identity theft. The numbers illustrate that – through November of calendar year 2015, the IRS rejected or suspended the processing of 4.8 million suspicious returns, and stopped $2.9 billion of refunds in other types of fraud. That’s not to mention the 1.4 million confirmed identity theft returns, totaling $8 billion. So, that’s $10.9 billion in confirmed fraudulent returns protected.

Despite the success, the IRS knows that there is much work still to be done. Fighting identity theft is an ongoing battle because identity thieves continue to find new ways to steal people’s personal information for their personal gain.

That’s why there’s such a strong effort to put new safeguards in place through the Security Summit. Some of these safeguards will not be seen by taxpayers, yet still are invaluable in fighting identity refund fraud. And, others will definitely be seen.

For example, the most visible change will be new password protections for private-sector tax software accounts. Now, a minimum eight-digit password using a combination of letters numbers and special characters is required. New security questions, lock-out features and new ways to verify emails will also bolster protection. All changes are meant to help protect taxpayers from identity thieves who take over their computers and file fraudulent tax returns using their names and Social Security numbers.

States have also stepped in, and have their own new safeguards. For example, driver’s license numbers and other data may be required before the state releases refunds. Visit your state’s tax agency website to see if there are changes for you in 2016.

Staying transparent, the tax software industry will be sharing many new data elements with the IRS and the state, helping to determine if a return is valid. Moreover, the IRS continues to improve the efficiency and amount of identity theft data models and filters used to identify potentially fraudulent returns. These pre-refund filters prevent most fraudulent returns from going through, and the IRS continues to work with financial institutions to help the effort. The IRS, states and tax industry also will routinely share information about identity theft trends or new schemes so that all parties can react quickly and appropriately.

Increasing Efforts to Help Victims

Despite all these strides made to combat identity theft, there is still the very realistic and scary issue of helping victims of identity theft. The IRS knows that it is a very infuriating, complex process for victims, and they are working hard to resolve identity theft cases as quickly as possible.

Each tax year, the IRS is reviewing and implementing processes and policies to minimize identity thefts and assist those that were victimized. Here are some of the key steps for this tax year:

  • Centralizing victim assistance work: During 2015, the IRS centralized most of its victim assistance work within one function and created an Identity Theft Victim Assistance organization. The agency is also reviewing its process and procedures to better serve taxpayers and help reduce the time it takes to resolve cases. A case can typically take 120 days to resolve, but complex cases can take longer.
  • IP PIN: The IRS Identity Protection PIN (IP PIN) is a unique six-digit number that is assigned annually to victims of identity theft. It helps verify that a particular taxpayer is the rightful filer of the return. For 2016, everyone with an IP PIN must have it entered on the return. This includes primary and secondary taxpayers, as well as dependents. Please be aware: some states also may have new security PINs this year. If the IRS issued you an IP PIN, you must use it to file your federal tax return.
  • IP PIN Pilot: The IRS will continue its IP PIN pilot program that allows taxpayers who filed tax returns last year from Florida, Georgia or the District of Columbia, to opt into the IP PIN program.


Over the last three fiscal years, the Criminal Investigation (CI) has helped convict approximately 2,000 identity thieves. For 2015, alone, the IRS started 776 identity theft-related investigations, sentencing 774 of those through CI Enforcement efforts. The average jail time was 38 months, with the longest being over 27 years.

The nationwide Law Enforcement Assistance Program (LEAP) provides for the disclosure of federal tax return information associated with the accounts of known and suspected victims of identity theft, with the express written consent of those victims. More than 1,100 state/local law enforcement agencies from 48 states now participate. For fiscal year 2015, more than 6,700 requests were received from state and local law enforcement agencies.

More information is available at IRS.gov/identitytheft, including the Taxpayer Guide to Identity Theft.

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