Tax Fraud Prevention

  • Identity Theft

A recent audit of the IRS revealed some very disturbing information regarding tax refunds this past year. It appears there was around 4 billion dollars fraudulently refunded to identity thieves. Some of the mistakes in processing make you really call into question the common sense of the IRS. For example, there were over 655 refunds that were sent to the same address in Lithuania. The report went on to explain that there were 1.1 million refunds that were sent to individuals who used stolen Social Security numbers. The average time it took to correctly remedy the stolen SSN predicament was over 10 months. All in all, the fraud cost taxpayers around $3.6 billion.

Obviously, there is a problem. In defense of the IRS, they are trying to take the right steps to remedy this issue. They now have over 3,000 employers working specifically on the issue of identity theft compared to 1,500 previously. They are also deploying some new screening filters.

I commend the IRS for taking some steps in the right direction, but Im curious as to why they are so lax in the verification process. There should be more regulations passed down to the tax preparation companies and CPAs. If there is a known issue with SSN fraud, why dont they require SSN verification and some type of authentication process, such as Knowledge Based Authentication with electronic filing? I know that sometimes problems are more complex than they appear, but in this case, deploying some type of identity and authentication system seems like the simple solution.

There are many different verification processes to assist with these issues. Whether its drivers license verification or SSN verification, the IRS should be more proactive with implementing stronger measures to protect citizens.


[Contributed by Shea Allen, Account Specialist]