IRS: Tax ID theft down sharply in 2017

Written on Feb 11, 2018

The IRS says it saw steep declines in tax-related identity theft in 2017, and it attributed the success to Security Summit initiatives.

Key indicators of identity theft dropped for the second year in a row in 2017. This includes a 40% decline in taxpayers reporting they were victims of identity theft in 2016. Since 2015, the number of tax-related identity theft victims has fallen by almost two-thirds and billions of dollars of taxpayer refunds have been protected.

The IRS, state tax agencies and the tax industry have started their third filing season working as the Security Summit, a private-public sector partnership formed in 2015 to combat identity theft. Summit partners have put in place multiple behind-the-scenes safeguards that are helping protect the nation’s taxpayers.

Key calendar-year 2017 indicators include:

  • The number of tax returns with confirmed identity theft declined to 597,000 in 2017, compared to 883,000 in 2016 – a 32% decline. The amount of refunds protected from those fraudulent returns was $6 billion in 2017, compared to $6.4 billion in 2016. In 2015, there were 1.4 million confirmed identity theft returns totaling $8.7 billion in refunds protected. Overall during the 2015-2017 period, the number of confirmed identity theft tax returns fell by 57% with more than $20 billion in taxpayer refunds being protected.
  • The financial industry is a key partner in fighting identity theft, helping the IRS recover fraudulent refunds. In 2017, banks recovered 144,000 refunds compared to 124,000 in 2016 – a 16% increase. The amount of refunds recovered was $204 million in 2017, compared to $281 million in 2016. In 2015, the financial industry recovered 249,000 refunds totaling $852 million.
  • In addition to these steep declines, the IRS also is continues reducing the year-over-year inventory backlog of taxpayers who file identity theft reports. For fiscal year 2017, the beginning inventory of identity theft reports submitted by taxpayers was approximately 34,000, under 10% of the fiscal year 2013 beginning inventory of 372,000 taxpayer identity theft cases.

These declines follow extensive Summit education efforts in 2017. The Summit partnership conducted awareness campaigns for tax professionals (“Don’t Take the Bait”) and for taxpayers (“National Tax Security Awareness Week”).

Last year, multiple data breaches from outside the tax system means cybercriminals have basic information on millions of Americans, such as names, Social Security numbers and addresses. The steps taken by the Summit partners since 2015 help protect against fraudulent tax filings that use this basic data. As the IRS and Summit partners have strengthened their defenses, identity thieves are looking to steal more detailed financial information to help provide a more detailed, realistic tax return to better impersonate legitimate taxpayers. Because they need more personal data, cyberthieves increasingly are targeting tax professionals, human resource departments, businesses and other places that have large amounts of sensitive financial information. The IRS continues to see a number of these schemes in attempts to get taxpayer W-2 information from tax professionals and employers.

Everyone must be vigilant and alert. Both taxpayers and tax professionals are encouraged to:

  • Use Security Software. Always use security software with firewall and anti-virus protections. Make sure the security software is always turned on and can automatically update. Encrypt sensitive files, such as tax records, stored on computers. Use strong, unique passwords for each account.
  • Watch out for scams. Learn to recognize and avoid phishing emails, threatening calls and texts from thieves posing as legitimate organizations such as banks, credit card companies and even the IRS or a tax software firm. Do not click on links or download attachments from unknown or suspicious emails.
  • Protect personal data. Don’t routinely carry Social Security cards and make sure tax records are secure. Shop at reputable online retailers. Treat personal information like cash; don’t leave it lying around.

For more information, see www.irs.gov/identitytheft.

How will the 2017 tax law changes affect your CPA candidates?

The AICPA Board of Examiners has approved Jan. 1, 2019 (19Q1), as the day content related to the Tax Cuts and Jobs Act of 2017 will be eligible for testing on the Uniform CPA Examination. For the rest of 2018, the Exam will continue to test the tax laws and regulations in effect before the enactment of the new law. For more detailed information, view the AICPA’s recent Exam announcement.

Leave a comment