IRS Enlists States, Tax Preparers to Halt Hacking of Taxpayers

Photo (cc) by 401(K) 2013

The IRS announced it is partnering with states and tax preparation firms to help strengthen its security after hackers accessed more than 100,000 U.S. tax accounts and used the information to collect more than $50 million in fraudulent tax refunds.

This week, the IRS announced plans to institute a more rigorous process to validate taxpayers’ identities when they file their tax returns.

The agency also plans to work with tax preparation firms, including Intuit, H&R Block, Jackson Hewitt Tax Service, Liberty Tax Service, as well as state officials, to share information and trends that could help identify potential fraud.

“We’re asking every company that helps taxpayers file returns to provide us information that will add layers of security and step up their prerefund authentication,” IRS Commissioner John Koskinen said Thursday, according to The Wall Street Journal. “We’re also making clear that companies need to let the IRS know if they detect any suspicious activity or refund fraud patterns.”

The IRS lost nearly $6 billion to identity-theft fraud in 2013. So far in 2015, the IRS has prevented 3 million fraudulent filings, a 30 percent increase from 2014, the Journal report said.

Although the new collaboration between tax preparers and state and federal tax agencies should help thwart criminals, fighting fraud is an uphill battle, The Washington Post said.

“None of us has a silver bullet to defeat this enemy,” Koskinen said.

The details about the IRS’ planned safeguards are vague, but it appears that “tax authorities and industry officials don’t want to make it too easy for crooks to devise a new workaround,” the Journal reported.

Koskinen is urging Congress to move up the deadline for employers’ filing of W-2 forms with the IRS because that information can be used to verify returns and catch potential fraud. As it stands, that information isn’t due until months after many taxpayers have filed and received their returns.

Some states, including Utah and Alabama, require employers to file W-2 information by Jan. 31, the WSJ said.

What do you think of the IRS’ plans to thwart hackers? Have you been a victim of identity theft or a cyberattack? Share your comments below.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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