The public might not want to think about their tax returns at this time of year, but with National Tax Security Awareness Week already here, there’s no time like the present to think of your data safety.

Only a short time ago, tax refund fraud was a multi-billion-dollar industry. Some projections from just two years ago claimed that the total amount paid out by the IRS in fraudulent refunds would reach $21 billion by 2016, a staggering increase in a very short amount of time. This crime has only been exacerbated by technology, and can potentially be traced to the vast  amounts of personal identifiable information that is now “out there” due to many large-scale data breaches in the past few years.

So what is the IRS doing to put a tourniquet on the flow of funds to criminals? Plenty. New information from the Security Summit partnerships shows that tax fraud is on the decline, largely due to better detection at the federal level that stops fraudulent returns before they can be processed.

Some of the changes have been fairly simple in their scope. One new regulation, for example, puts a limit on how many refund payments can be directly deposited into a single account; after the three-deposit limit, the recipient must wait for a paper check that will only be mailed to the taxpayer’s address of record. That might seem like an inconvenience to legitimate taxpayers who file multiple returns for business reasons, for example, but it helps to stem the tide of fraud.

Among the other preventive measures, the IRS has also deployed filters that screen for potential fraud on incoming tax returns. Back in 2012, there were only eleven different filters to look for red flags, but now there are 183 filters. Again, it can slow the process down slightly, but the result is that billions of dollars in fraudulent returns were stopped before payment could be issued to criminals.

The partnership that was forged in 2015 as part of the Security Summit brought greater attention to the scope of the problem and resulted in an increased focus to put an end to tax refund fraud. The results so far have been positive, with a significant decrease in the numbers of payments that are made and an overall drop in the numbers of fraudulent returns that are even filed. Ideally, the message is reaching identity thieves that this kind of crime is no longer going to pay off.

Obviously, there’s more that the public can do, though. For taxpayers, the IRS and the Summit partners offer a public awareness campaign called “Taxes. Security. Together.” to help educate people on ways to protect their financial data online. Another program, “Protect Your Clients, Protect Yourself,” is aimed at preventing fraud by educating tax professionals. Finally, tax preparers have been given some tools in a ten-week campaign on avoiding phishing attempts that steal taxpayers’ information, called “Don’t Take the Bait.” These and other resources will be available through the coming months as we gear up for another tax filing season.


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