WASHINGTON — The Internal Revenue Service joined today with
representatives of tax preparation and software firms, payroll and tax
financial product processors and state tax administrators to announce a
sweeping new collaborative effort to combat identity theft refund fraud
and protect the nation's taxpayers.
The agreement — reached after the project was originally announced
March 19 — includes identifying new steps to validate taxpayer and tax
return information at the time of filing. The effort will increase
information sharing between industry and governments. There will be
standardized sharing of suspected identity fraud information and
analytics from the tax industry to identify fraud schemes and locate
indicators of fraud patterns. And there will be continued collaborative
efforts going forward.
"This agreement represents a new era of cooperation and collaboration
among the IRS, states and the electronic tax industry that will help
combat identity theft and protect taxpayers against tax refund fraud,"
IRS Commissioner John Koskinen said. "We've made tremendous progress,
and we will continue these efforts. Taxpayers filing their tax returns
next filing season should have a safer and more secure experience."
Koskinen convened a Security Summit on March 19 with the chief
executive officers and leaders of private sector firm and federal and
state tax administrators to discuss emerging threats on identity theft
and expand existing collaborative efforts to stop fraud.
Three specialized working groups were established as part of the
Summit, with members from the IRS, states and industry co-chairing and
serving on each team. During the past 12 weeks, the teams focused on
developing ways to validate the authenticity of taxpayers and
information included on tax return submissions, information sharing to
improve detection and expand prevention of refund fraud, and threat
assessment and strategy development to prevent risks and threats.
The groups agreed to several important new initiatives in this unprecedented effort, including:
*Taxpayer authentication. The industry and government groups
identified numerous new data elements that can be shared at the time of
filing to help authenticate a taxpayer and detect identity theft refund
fraud. The data will be submitted to the IRS and states with the tax
return transmission for the 2016 filing season. Some of these issues
include, but are not limited to:
- Reviewing the transmission of the tax return, including the improper
and or repetitive use of Internet Protocol numbers, the Internet
‘address’ from which the return is originating.
- Reviewing computer device identification data tied to the return’s origin.
- Reviewing the time it takes to complete a tax return, so computer mechanized fraud can be detected.
- Capturing metadata in the computer transaction that will allow review for identity theft related fraud.
*Fraud identification. The groups agreed to expand sharing of fraud
leads. For the first time, the entire tax industry and other parts of
the tax industry will share aggregated analytical information about
their filings with the IRS to help identify fraud. This post-return
filing process has produced valuable fraud information because trends
are easier to identify with aggregated data. Currently, the IRS obtains
this analytical information from some groups. The expanded effort will
ensure a level playing field so everyone approaches fraud from the same
perspective, making it more difficult for the perpetration of fraud
schemes.
*Information assessment. In addition to continuing cooperative
efforts, the groups will look at establishing a formalized Refund Fraud
Information Sharing and Assessment Center (ISAC) to more aggressively
and efficiently share information between the public and private sector
to help stop the proliferation of fraud schemes and reduce the risk to
taxpayers. This would help in many ways, including providing better data
to law enforcement to improve the investigations and prosecution of
identity thieves.
*Cybersecurity framework. Participants with the tax industry agreed
to align with the IRS and states under the National Institute of
Standards and Technology (NIST) cybersecurity framework to promote the
protection of information technology (IT) infrastructure. The IRS and
states currently operate under this standard, as do many in the tax
industry.
*Taxpayer awareness and communication. The IRS, industry and states
agreed that more can be done to inform taxpayers and raise awareness
about the protection of sensitive personal, tax and financial data to
help prevent refund fraud and identity theft. These efforts have already
started, and will increase through the year and expand in conjunction
with the 2016 filing season.
"Industry, states and the IRS all have a role to play in this
effort," Koskinen said. "We share a common enemy in those stealing
personal information and perpetrating refund fraud and we share a common
goal of protecting taxpayers. We want to build these changes into the
DNA of the entire tax system to make it safer."
Many major system and process changes will be made this summer and
fall by the participants in order to be ready for the 2016 filing
season. The public-private partnership also will continue this
cooperative, collaborative approach to address not just short-term
issues but longer-term issues facing the tax community and taxpayers.
The partnership parties recognize the need to continuously improve
our tax system defenses for combating this threat to taxpayers and our
tax system, Koskinen added. Those defenses include a continually
improving multi-level identity proofing and authentication capability
that anticipates and stops threats.
"I applaud the industry and the states for stepping forward to take
on this challenge and making the needed changes," Koskinen. "This is
good for taxpayers, good for tax administrators and good for the tax
community."
Koskinen emphasized that a continuing theme throughout this effort
focuses on protecting taxpayer information and privacy. “Working
together we can achieve results that none of us, working alone, could
accomplish,” he said.
In addition to companies from the private sector, the summit team
included several groups including the Electronic Tax Administration
Advisory Committee (ETAAC), the Federation of Tax Administrators (FTA)
representing the states, the Council for Electronic Revenue
Communication Advancement (CERCA) and the American Coalition for
Taxpayer Rights (ACTR).
