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IRS Cracking Down on Tax Return Identification Theft

Throughout the past few tax seasons, the Internal Revenue Service has been increasing its efforts to intercept fraudulent tax returns filed by identity thieves. Despite the agency ramping up these efforts, these scammers still continue to collect millions of dollars in fraudulent tax refunds.

Overview

According to a report that was released by the Treasury Inspector General of Tax Administration(TIGTA), the amount of fraudulent returns detected and stopped from entering the IRS system has steadily increased this tax season. The report goes on to say that these fraudulent returns’ e-files are rejected, and paper returns are prevented from being posted when identity fraud is detected.

Data

The TIGTA report states that as of February 25th, 2023, the IRS identified roughly 31,000 fraudulent tax returns. On these 31,000 returns, roughly $310 million in false claims were made. The Internal Revenue Service was able to prevent the issuance of $303 million out of the $310 million total, meaning that the agency prevented roughly 97% of these false refunds from being sent out.

Lower Than Last Year

When compared to last year’s data, these numbers are stiflingly low. During the same exact period last year, the IRS identified roughly $818 million in fraudulent returns, and the agency was able to stop roughly $808 million of that money from being sent out.

Filtering Out Fraudsters

For the upcoming filing season, the IRS is introducing 236 filters to identify and prevent identity theft on tax returns and also prevent fraudulent refunds from being sent out. This is a decent increase, as the agency only used 168 filters for the previous tax season. The purpose of these filters is to include criteria based on the properties of tax returns in which the identities have already been confirmed. These properties include income and withholding claims, taxpayer age, criminal history, and more.

Wrap Up

Along with increasing the number of filters being used to prevent ID fraud on tax returns, the IRS has also begun to lock the tax accounts of deceased and incarcerated people, as one of the biggest forms of ID fraud is using the social security number of a deceased or incarcerated person to file. As time goes on, the IRS will continue to receive funding due to the Inflation Reduction Act. Now that the agency has the funding, it is no surprise that security measures are being increased.

 
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