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ASK THE EDD ATTORNEY – LATEST IRS STRATEGIES TO COMBAT IDENTITY THEFT – EFFECTIVE GROUP EFFORT OR JUST ANOTHER MINI BUREAUCRACY IN THE MAKING?

By Robert S. Schriebman

July 12, 2016

Introduction

In an effort to combat and stop identity theft the IRS has formed seven new strategy groups collectively known as The Security Summit Partners. These groups, together with twenty seven states, are working on ways to minimize identity theft and other illegal practices for the upcoming 2017 filing season. In this article I will give you an overview of what each group has planned.

The IRS has finally acknowledged that these identity thieves have become increasingly sophisticated and work with and are sponsored by national and international criminal syndicates.

The Security Summit consists of seven work groups as follows:

  • Authentication Work Group
  • Communication and Taxpayer Awareness Work Group
  • Financial Services Work Group
  • Information Sharing Work Group
  • Information Sharing and Analysis Center Work Group (ISAC)
  • Tax Professionals Work Group
  • Strategic Threat Assessment and Response (STAR) Work Group

On June 29, 2016 the IRS issued a Press Release explaining the objectives of each group for the 2017 tax filing season (FS-2016-21).

Authentication Work Group

This group consists of the IRS and its partners in the payroll and software industries. The group plans to adopt a pilot program that will provide W2 Verification Codes to 50 million W2s in 2017. The Verification Code is a 16-digit alphanumeric code that will be integrated into software products. Currently, the project involves only 2 million W2s for 2016. The objective is to verify the information as the W2s are filed and prevent identity thieves from using fake W2s to create fraudulent refunds. Eventually, corporate tax returns will be integrated into this pilot program.

Communication and Taxpayer Awareness Work Group

The Security Summit has a campaign known as "Taxes. Security. Together." This is an effort to educate and reach out to about 700,000 tax return preparers to make sure they have the information they need to protect themselves from cyber attacks and to safeguard taxpayer data.

Financial Services Work Group

Twenty three states are working with the IRS and the financial industry to help identify fraudulent state tax refunds. This is an effort to ensure that refunds go only into proper accounts. The group will operate a concept known as the Ultimate Bank Account (UBA) that will include all refund transfer products including gift and pre-paid cards, paper checks, and direct deposits. The UBA helps identify actual owners of these accounts. States and the IRS will also expand real-time communications with the pre-paid card industry to block accounts associated with fraud.

In reading the IRS Release it was troubling to learn only 23 states are working with the IRS to prevent several levels of fraud. This means that for the 2017 filing season, 27 states are not!

This work group will collaborate with the Authentication Work Group to evaluate data from electronically filed returns. The goal is to provide improved communication to states and other units working with the IRS. Once identity theft is confirmed, the data will be shared quickly and efficiently.

Information Sharing and Analysis Center Work Group (ISAC)

This will basically be an early warning identity theft center that will work with the new Identify Theft Refund Information Sharing & Analysis Center (IDTTRF-ISAC). The information gained from this system will be sent to law enforcement agencies and to identity theft prosecutors.

Tax Professionals Work Group

This is an outreach program aimed at educating tax professionals. The program will assist tax professionals in identifying potential identity theft.

Strategic Threat Assessment and Response (STAR) Work Group

This group will implement the new National Institute of Standards and Technology (NIST) CyberSecurity Framework. This will eventually develop a cyber-threat assessment to our tax system.

Conclusion

All in all it looks like the IRS and its Security Summit Partners are developing a Tax Star Wars system that is highly technical and will have many facets. We have learned, however sadly, that the bad guys always seem to be one step ahead of the good guys. All of this sounds very impressive and I have to admit that it is all over my head. But in the back of my mind I am wondering rather we are effectively instituting identity theft intervention and prevention or are we just creating seven new mini bureaucracies that will disappoint.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure," both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures – A Manual for Practitioners" published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures – A Manual for Practitioners" published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure," both published by Commerce Clearing House.

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