Crackdown on Tax Fraud Coming in 2016

November 2, 2015 | By: Miranda Marquit

catching tax fraudAll forms of fraud are a matter of course in today’s world. Tax fraud is one of those things that has been on the rise in recent years. However, even as scammers try new techniques, the IRS and others are working to find new ways to detect fraudulent returns.

One of the reasons it’s so important for the IRS and tax software providers to step up their efforts is the rise in the number of fraudsters filing returns and claiming tax credits in others’ names, hoping to get your money before you even file your own tax return.

In order to help cut down on this type of tax fraud, the IRS has announced that it will be getting new data from tax software companies. These data points should able to help identify fraudulent returns better.

What Data Is Being Used to Catch Tax Fraud?

In the past, tax software companies haven’t always shared data with the IRS and with state governments. However, with high-profile tax software breaches last year, and problems with other data being compromised, some feel it’s time for a little more collaboration. Some of the data that the IRS and tax software companies hope will help reduce tax fraud include:

  • IP addresses: If it looks as though a number of tax returns are being submitted from the same IP address, that can be a red flag. Another red flag is if it appears as though returns are being filed from the same foreign address.
  • Automatic generation: There is a difference between entering your information into tax software and having a machine generate a tax return. This can be seen in the tax software data, and it will be used to red flag certain returns.

There are hopes that having access to this data and having it looked at, will reduce the number of fraudulent tax refunds paid out.

Tighter Security for Tax Filers

Not only is there going to be more data used in the effort to fight tax fraud, but the IRS says that there will be tighter security for those filing a tax return. The hope is that, on the tax software end, it makes things harder for scammers to access your information from a database.

Most of these tighter security measures will be seen in implementation on the retail side. You might notice that unsuccessful login leads to being locked out of your account. You’ll have extra security questions to answer as well. On top of that, some software providers are starting to follow some of the same protocols as banks do, in sending a verification email or text with a PIN that allows you to access your tax account.

Finally, you might have to come up with a better password. Boosting password requirements so that you are forced into best practices can also protect your account. While it might add a layer of inconvenience, it’s a small price to pay.

Your tax refund contains all the information someone needs to perpetrate fraud. It makes sense to do what you can to secure it.