The State of Maryland is Fighting Back.
Maryland is putting forth some tough measures against the growing problem of tax refund identity theft. Their proposed bill now puts more responsibility on tax-preparation professionals.
The cost of fraudulent tax returns to the American taxpayer hit an all-time high in 2015—$5.8 billion! And, this doesn’t even take into account the fraudulent $24.2 billion in tax refunds the IRS halted before payments were made to the cyber criminals!
This number continued to rise until measures were put into place 2016. However, there’s still a massive amount of ongoing fraud. Maryland’s new bill will provide authorities with another tool to fight against these activities.
Identity Theft Refund Fraud
The Government Accountability Office (GAO) defines identity theft refund fraud as an act where a thief used the personally identifiable information of a legitimate taxpayer to file a fraudulent return in an effort to claim a refund. The IRS is finding it difficult to ascertain the true costs associated with this type of fraud. Additional costs would include the work required to combat the activities.
We’re all encouraged to take steps to prevent the loss of our personal data, including:
- Not carrying social security cards on a daily basis,
- Creating a schedule to actively check your credit reports, and
- Protecting personal computers with anti-spam software and secure firewalls.
The Public/Private Crackdowns on Tax Fraud
The government has taken the unprecedented step of collaborating with nongovernment organizations in an effort to combat the high levels of identity theft—These include partnerships with major tax preparation organizations and banks. More than 600 banking partners are now actively engaged in the fight by stopping questionable refunds before they’re completed. The partnership with tax-preparation agencies allows teams to monitor repeated returns that originate from the same IP address.
This crackdown continues as billions of dollars leak from government coffers and flow into the hands of criminals. While fraudulent claims have dropped by nearly 50 percent from 2015 to 2016, there’s still a great deal of work to be done to ensure the safety of taxpayers’ private information.
The recent hack of the IRS website to the tune of $39 million doesn’t inspire confidence. It reveals that as one avenue of crime is curtailed, another opens up.
The importance of protecting personally identifiable information continues to grow, as cyber criminals become more creative in their efforts to defraud innocent citizens.
New Security Measures Are in Place.
The IRS is continually on the lookout for ways to reduce identity theft, and is implementing some stringent new procedures that have slowed the tide of loss in the last 18 months:
- Forms are being revised to include variable verification codes, such as those on some W-2s.
- Metadata attached to the returns are also scrutinized to ensure that it doesn’t trigger certain business parameters, either within the tax preparation agency or after the return has been submitted to the federal government.
- New measures in place for the upcoming 2017 tax return year include 37 additional data elements that will help create a “trusted customer” profile so it will be more difficult for cyber criminals to duplicate.
The Maryland Tax Preparation Act of 2017
Even with all the activity at the federal level, and cooperation between banks and tax preparation agencies, Maryland has been hit hard enough from tax return identity theft that lawmakers are fighting back at the state level. Maryland is taking a tough stance on this expensive form of fraud.
In the past, cyber criminals were thrilled to gain access to credit cards that allowed them to take advantage of one-time transactions and large purchases. Today’s thieves work to gain more by using individuals’ Social Security numbers for long-term benefits.
Federal tax refunds can be virtually untraceable, providing significant refund opportunities on an ongoing basis. Maryland is shoring up their defenses by creating the Taxpayer Protection Act of 2017, aimed at protecting taxpayer information and holding tax-preparation professionals and those filing fraudulent returns more accountable.
More than $21 million in returns were blocked by the office in the previous tax year. However, the number of fraudulent returns that were successfully completed is unknown. Investigating these crimes is challenging and requires a lot of detailed work by law enforcement professionals. Because of this, a bill is being introduced to extend the time to file charges from 3 years to 6 years.
The new requirements also state that professionals who file tax returns must be registered with Maryland’s Board of Tax Preparers. Plus, they’re increasing the fines against tax-preparation agencies that attempt to “help” customers on their way to a bigger return by falsifying information.
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