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IRS and Security Summit Attack Identity Theft And Fraudulent Refunds - Carland & Andersen, Inc. - Certified Public Accountants

New developments by the IRS and the states to combat cyber security problems

Over the past two years, the IRS has been working with state governments and tax preparation firms, to develop new ways to detect and prevent cyber fraud. Each year the IRS and the states face the challenge of sophisticated, and often organized criminals, out to create fraudulent refunds for themselves, or to gain access to the sensitive financial information contained in tax returns, to perpetrate other forms of identity theft.


The work of the Security Summit Partners is focused on keeping data more secure while in the hands of legitimate tax preparers. They also create computer logarithms and verify the authenticity of filed tax returns. This prevents fraudulent use of sensitive data, and prevents the issuance of fraudulent refunds, which tend to be filed electronically, and in staggering numbers. Often, the first few days of the electronic filing season are the most hectic, with fraudsters using stolen EFINs (Electronic Filing Identification Numbers) from legitimate tax preparers. This year, the filing season for electronic and paper filing opened on January 23. The IRS has already announced that for tax returns with amounts claimed for the earned income credit and refundable child credits, refunds will not be released until February 15.

New measures in place for this filing season for tax preparers include the IRS requirement that tax preparers have a written, signed document from their clients, confirming that the bank account to which a direct deposit refund is headed is, indeed, the account they intended. Another requirement, currently more for the benefit of those states who have requested it and will use it, is that the tax return data included in the electronically filed state tax return contain the name of the issuing state and the document number of state issued identification cards, generally drivers licenses, and the date of issuance and date of expiration. North Carolina is participating in this program.