The IRS, state tax agencies and the tax industry are working together to protect taxpayers from fraud.
The Indiana Department of Revenue, alongside the tax industry and other state tax agencies nationwide, has come together with the IRS to form the Security Summit. The Security Summit is showing results in the fight against tax fraud through a series of safeguards enacted to protect taxpayers. In 2016, tax-related identity theft reports fell by more than 50 percent, resulting in 275,000 fewer victims of tax fraud than in the prior year. As the Security Summit continues to develop new ways to reduce identity theft in 2017, they warn taxpayers to beware of potential tax schemes.
IRS Commissioner John Koskinen stated, “The Security Summit partnership continues to develop and strengthen tools to stop fraudulent returns from getting into the tax system. We’re calling on taxpayers to do everything they can to protect their private information, because criminals continue looking for new and more sophisticated ways of beating the system. We also encourage tax professionals and others in the private and nonprofit sectors with access to large amounts of sensitive information to watch out for identity theft schemes.”
In an effort to protect local taxpayers, the Indiana Department of Revenue enacted the Identity Protection Program to filter taxpayer identities and evaluate refunds. As part of this program, more than 220,000 taxpayers were required to participate in an Identity Confirmation Quiz to verify their identities in 2016. According to the Indiana DOR Identity Protection Program Statistics, the program helped more than 5,500 Hoosiers discover their identities were stolen and used to claim fraudulent tax refunds last year. The program not only helped to protect Indiana residents from potential fraud, but also saved the state and Hoosier taxpayers more than $100 million in fraudulent refunds since its induction in 2014.
In addition to protecting taxpayers from identity theft, phone scams and phishing schemes are top priorities for the IRS and the State of Indiana. Cases of scammers who impersonate IRS representatives are a growing problem in the Hoosier State.
Per the Indiana Attorney General’s Office, although the number of tax-related identity theft reports made in 2016 decreased by approximately 64 percent in comparison to prior year data, the number of false IRS impersonation complaints increased by more than 5 percent. More than 3,700 complaints were reported to the Indiana AG, roughly 200 more complaints than in the prior tax year.
“There are people out there that will take advantage, so if it looks strange, contact someone and find out,” said Indiana Attorney General Curtis Hill. Taxpayers should file as early as possible as a step to avoid possible tax schemes. “That way, if you’ve got your information in and you get a phone call, you’re already ahead of the game,” Hill said.
While tax scams involving IRS impersonators are at an all-time high, the IRS announced the New IRS Private Debt Collection Program, which will enable designated contractors to collect debts on their behalf. While it is not yet known if this program will ultimately increase tax-related phone scams, an increase can be anticipated. Because of this, the IRS wants to help taxpayers avoid confusion, know their rights and tax responsibilities, and know how to identify phone scams where callers impersonate the IRS or the designated debt collection agency. According to the IRS, taxpayers and their representatives will be sent written notice by mail of the account transfer. The designated agency will then send a separate, second notice by mail, stating that the transfer has occurred, before any phone calls are made. The collection agencies will not request payment by a prepaid card but will inform taxpayers about electronic payment options on IRS.gov/PayYourTaxBill. All payments by check should be made payable to the U.S. Treasury and sent directly to the IRS, not the private collection agency. The agencies will identify themselves as contractors and must follow the Fair Debt Collection Practices Act. They should also be courteous and respectful of taxpayer rights. The IRS informs taxpayers that the Internal Revenue Service will never:
n Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
n Threaten to immediately bring in local police or other law enforcement to have the taxpayer arrested for not paying.
n Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
n Ask for credit or debit card numbers over the phone.
The IRS and Indiana Department of Revenue also suggest the following steps taxpayers can take to identify tax schemes and protect themselves from becoming victims of tax fraud:
n Protect your personal data. Don’t routinely carry a Social Security card, and make sure tax records are secure. Treat personal information like cash; don’t leave it lying around.
n Shred all documents that contain personal information before throwing them away.
n Always use security software with firewall and anti-virus protections. Make sure the security software is always turned on and can automatically update. Encrypt sensitive files, such as tax records, stored on the computer. Use strong passwords. Do not click on links or download attachments from unknown or suspicious emails.
n Learn to recognize and avoid phishing emails, threatening phone calls and texts from thieves posing as legitimate organizations such as a bank, credit card company and government organizations, including the IRS.
n Find the right tax preparer. Ask for recommendations and research the preparer before handing over any personal information.
If you think you are being targeted or may have been a victim of tax fraud, visit irs.gov/individuals/identity-protection or contact the Treasury Inspector General for Tax Administration at (800) 366-4484.
Reports should also be made to the Indiana Attorney General’s office by filing a complaint online at IndianaConsumer.com or by calling (888) 834-9969.
For more information, visit IRS.gov and DOR.IN.gov.
Brittany Sabalza is director of continuing education at Pro Tax Solutions in Indianapolis.
