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The Electronic Tax Administration Advisory Committee (ETAAC) released its annual report, whose focus was the prevention of identity theft and tax refund fraud. The IRS has been fighting tax refund fraud for years, detecting millions of fraudulent tax returns filed by scammers every filing season 

Despite the IRS’ best efforts, the Treasury loses millions of dollars to scammers in fraudulent refunds. In 2019, the IRS prevented $12.2 million (77.2%) from reaching the hands of scammers. Yet, millions of dollars of taxpayers’ money is still reaching scammersCPA Practice Advisor shares the key points of the report that aims to curb identity theft and refund fraud: 

The report groups a total of 10 recommendations into three sections: enabling and expanding the IRS-sponsored Security Summit, improving security in key areas of the tax system, and protecting and enabling taxpayers. 

Key findings of the report are that:  

  • The Security Summit continues to make progress in the fight against IDTTRF. Sustaining the Security Summit’s ability to detect and prevent IDTTRF will require continued engagement with existing and new partners from both government (federal, state and local) and industry;
    Congressional funding and support for the Security Summit and ISAC remain a key enabler to the ongoing success of these initiatives; 
  • The IDTTRF threat will be a challenge for some time to come. In fact, nation-states and cybercriminals are becoming more sophisticated and will continue to make it difficult to detect and stop their criminal activities, which will directly impact legitimate taxpayers trying to meet their tax filing obligations; 
  • The implementation of new tax laws, such as the Tax Cuts and Jobs Act, requires IRS resources both to implement the substantive elements of any new law and also to analyze and prepare for potential new IDTTRF opportunities created by the new law; 
  • The commitment and professionalism of the IRS leadership and staff during the government shutdown was exemplary. Notwithstanding the disruption, the IRS prepared and executed contingency plans that minimized the impact of the shutdown on its operations including its efforts to stop IDTTRF. 

The committee recommended the following to help fight ID theft and tax return fraud:  

  1. Strengthen the Security Summit and ISA by:
  • Funding the ISAC 
  • Enacting and IDTTRF exception to IRC Section 6103 
  • Increasing the engagement of ISAC members 
  • Integrating the payroll community more fully into the Security Summit 
  • Piloting a Financial Services Company (FSC) Collaboration Space in the ISAC 
  1. Improve the security in key areas of our tax system by:
  • Assessing the state of information security in the tax professional community 
  • Granting the IRS the authority to establish and enforce security standards 
  1. Protect & enable taxpayers by:
  • Developing and expanding channels for identity proofing 
  • Collaborating with Security Summit members to identify and pilot emerging approaches for identity verification 
  • Engaging with the Security Summit to improve the IRS Taxpayer Protection Program’s taxpayer experience 

The full 2019 Electronic Tax Administration Advisory Committee Report is available on IRS.gov. 

The ETAAC is a public forum whose members work closely with the Security Summit, a joint effort of the IRS, state tax administrators and the nation’s tax industry established in 2015 to fight tax-related identity theft and cybercrime. ETAAC members represent various segments of the tax community, including individual and business taxpayers, tax professionals and preparers, tax software developers, payroll service providers, the financial industry and state and local governments. 

 

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