New Safeguard for 2017

Building on the successes of last year, the IRS, state tax agencies and the tax industry are enacting a series of new initiatives for 2017. These initiatives will better protect you from identity theft and refund fraud. However, we need your help. Everyone has a role to play in protecting data.

In the tax community, we’ve been working together since 2015 to put in place improved safeguards. These safeguards make it harder for identity thieves to file fraudulent returns successfully. That means identity thieves try to steal even more data to impersonate taxpayers.

Many of the changes will be invisible to taxpayers but will be invaluable to helping keep you safer from identity thieves. Our focus is on “trusted customer” features that help us authenticate both the taxpayer and tax return. Here are a few things we’re doing for 2017:

Sharing new data elements from tax returns. This helps us validate the return and the taxpayer. These elements include items such as the time it takes to complete the return. This helps us guard against mechanized computer fraud.
Sharing new data elements from business tax returns. This extends more identity theft protections to business filers as well as individuals.
Creating a new program between states and the financial industry. This allows banks and others to flag suspicious refunds.
Expanding the Form W-2 Verification Code initiative.  This initiative, started by the IRS last year, expands to 50 million forms in 2017 from 2 million in 2016. When completing a tax return, users enter a 16-digit verification code when prompted by the tax software. Both individuals and tax professionals use this code to validate the information on the Form W-2. The IRS anticipates in future years that the initiative will impact all Forms W-2.
Continuing to enhance software password requirements for individuals and tax professional users. This provides additional safety prior to filing.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

IRS Warns of a New Wave of Attacks Focused on Tax Professionals

The Internal Revenue Service warned tax professionals of a new wave of attacks that allow identity thieves to file fraudulent tax returns by remotely taking over practitioners’ computers.

As part of the Security Summit effort, the IRS urged tax professionals to review their tax preparation software settings and immediately enact all security measures, especially those settings that require usernames and passwords to access the products.  The IRS is aware of approximately two dozen cases where tax professionals have been victimized in recent days.

The IRS, state tax agencies and the tax industry – working as partners in the Security Summit – recently launched the Protect Your Clients; Protect Yourself campaign to increase awareness that criminals increasingly are targeting tax professionals and the taxpayer data they possess.

"This latest incident reinforces the need for all tax professionals to review their computer settings as soon as possible," said IRS Commissioner John Koskinen‎. "Identity thieves continue to evolve and look for new areas to exploit‎, especially as our fraud filters become more effective. The prompt identification of these attacks is another example of the great benefits that result from the close‎ working relationship the IRS now has with the tax industry and the states through the Security Summit initiative. Information is flowing more rapidly between our groups as we continue‎ our efforts to protect taxpayers."

These attacks come as the Oct. 17 deadline approaches for extension filers. The IRS first warned of a similar remote take-over attack in the spring, just ahead of the April 15 deadline, another peak period for tax professionals.

Thieves are able to access tax professionals’ computers and use remote technology to take control, accessing client data and completing and e-filing tax returns but directing refunds to criminals’ own accounts.

Victims in the tax community learned of these thefts while reconciling e-file acknowledgements.

Courtesy of IRS

For more information contact Neikrik, Mahoney and Smith at 502-896-2999

Identity Theft and Your Taxes

Tax-related identity theft normally occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund. Many people first find out about it when they do their taxes.

The IRS is working hard to stop identity theft with a strategy of prevention, detection and victim assistance.

The Taxes. Security. Together. awareness campaign is an effort to better inform you about the need to protect your personal, tax and financial data online and at home.

Keep your Social Security card at home and not in your wallet or purse. Only provide your Social Security number if it’s absolutely necessary.

Criminals often try to impersonate your bank, your credit card company, even the IRS in order to steal your personal data. Learn to recognize and avoid those fake emails and texts

If you cannot e-file your return because a tax return already was filed using your SSN, consider the following steps: • File your taxes by paper and pay any taxes owed. • File an IRS Form 14039 Identity Theft Affidavit. Print the form and mail or fax it according to the instructions. You may include it with your paper return. • File a report with the Federal Trade Commission using the FTC Complaint Assistant; • Contact one of the three credit bureaus so they can place a fraud alert or credit freeze on your account.

If the IRS identifies a suspicious tax return with your SSN, it may send you a letter asking you to verify your identity by calling a special number or visiting a Taxpayer Assistance Center.

If you are a confirmed ID theft victim, the IRS may issue an IP PIN. The IP PIN is a unique six-digit number that you will use to e-file your tax return.

If you suspect or know of an individual or business that is committing tax fraud, you can visit IRS.gov and follow the chart on How to Report Suspected Tax Fraud Activity.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Seven Steps for Making Identity Protection Part of Your Regular Routine

From Neikirk, Mahoney & Smith, the IRS has recently published seven steps for making identity protection part of your routine. Identity theft can be incredibly traumatic and frustrating. And in this day and age, it's always best to be on your guard against it.

Here are their seven tips on keeping yourself protected:

1. Regularly read your credit card and banking statements. Keep and eye out for anything that looks remotely suspicious. Keep in mind that neither your credit card nor bank – or the IRS – will send you emails asking for sensitive personal and financial information such as asking you to update your account.

2. Review and respond to all correspondences and notices from the IRS. Warning signs of tax-related identity theft can include IRS notices about tax returns you did not file, income you did not receive or employers you’ve never heard of or where you’ve never worked.  

3. Review each of your three credit reports at least once a year. Visit annualcreditreport.com to get your free reports.

4. Review your annual Social Security income statement for excessive income reported. You can sign up for an electronic account at www.SSA.gov.

5. Read your health insurance statements; look for claims you never filed or care you never received.

6. Shred any documents with personal and financial information. Never toss documents with your personally identifiable information, especially your social security number, in the trash.

7. If you receive any routine federal deposit such as Social Security Administrator or Department of Veterans Affairs benefits, you probably receive those deposits electronically. You can use the same direct deposit process for your federal and state tax refund. IRS direct deposit is safe and secure and places your tax refund directly into the financial account of your choice.

To learn additional steps you can take to protect your personal and financial data, visit Taxes. Security. Together. You also can read Publication 4524, Security Awareness for Taxpayers.

You can also contact Neikirk, Mahoney & Smith PLLC at 502-896-2999, or through our website contact form.

IRS Instructions for Requesting Copy of Fraudulent Returns

From Neikirk, Mahoney & Smith, the IRS has published the following instructions for requesting copy of fraudulent returns.

A victim of identity theft or a person authorized to obtain the identity theft victim’s tax information may request a redacted copy (one with some information blacked-out) of a fraudulent return that was filed and accepted by the IRS using the identity theft victim’s name and SSN. Due to federal privacy laws, the victim’s name and SSN must be listed as either the primary or secondary taxpayer on the fraudulent return; otherwise the IRS cannot disclose the return information. For this reason, the IRS cannot disclose return information to any person listed only as a dependent.
Partial or full redaction will protect additional possible victims on the return. However, there will be enough data for you to determine how your personal information was used.
To make the request, you will need to prepare a signed letter with the information described below and mail it and any additional documentation to the following address:

IRS
P.O. Box 9039
Andover, MA 01810-0939

The IRS may return your request if it is missing the required information and/or documentation, or is made in a manner other than described in these instructions.

If you are the victim of identity theft requesting a copy of fraudulent returns, you will need to provide the following information and documentation:

• Your name and SSN
• Your mailing address
• Tax year(s) of the fraudulent return(s) you are requesting
• The following statement, with your signature beneath: “I declare that I am the taxpayer.”

If you are a person authorized to obtain the identity theft victim’s tax information however, you will need to provide quite a bit more documentation.

For more information on what that documentation is, you can see the full IRS article here.
You can also contact Neikirk, Mahoney & Smith PLLC at 502-896-2999, or through our website contact form.

IRS, States, Industry Continue Progress to Protect Taxpayers from Identity Theft

From Neikirk, Mahoney & Smith, the Internal Revenue Service, state tax administrators and leaders of the tax industry announced today continued progress to expand and strengthen protections against identity theft refund fraud for the 2016 tax season.

The public-private sector partnership announced success in identifying and testing more than 20 new data elements on tax return submissions that will be shared with the IRS and the states to help detect and prevent identity-theft related filings. In addition, the software industry is putting in place enhanced identity requirements and validation procedures for their customers to protect accounts from identity thieves.

“This unprecedented partnership continues to put strong new safeguards in place for the 2016 tax season,” IRS Commissioner John Koskinen said. “We are breaking new ground in the battle against identity theft. Taxpayers will have more protection than ever when they file their tax returns.”
Known as the Security Summit, the unprecedented collaborative effort began in March and culminated in the development of several recommendations in June between the IRS, leaders of tax preparation and software firms, payroll and tax financial product processors and state tax administrators. Security Summit participants also identified additional topics for collaboration in the months ahead, and have continued to work together as a group to leverage their collective resources and efforts to protect taxpayers.

Koskinen and other leaders met in Washington, D.C., Tuesday to update the effort. To date, 34 state departments of revenue and 20 tax industry members have signed memorandums of understanding regarding roles, responsibilities and information sharing, with more expected to sign later.

As part of the Security Summit process, members from the IRS, states and industry are co-chairing and serving on several teams. The teams have focused on a number of areas including improved validation of the authenticity of taxpayers and information included on tax return submissions, increased information sharing to improve refund fraud detection and expand prevention, as well as more sophisticated threat assessment and strategy development to prevent risks and threats.

The industry and government groups identified numerous new data elements that can be shared at the time of filing with the IRS and states to help authenticate a taxpayer and detect identity theft refund fraud. There are more than 20 new data components that will help detect possible identity theft. The data will be submitted with the tax return transmission for the 2016 filing season, a step that will help detect and prevent refund fraud on both the federal and state level.

Another component will enhance identity validation for taxpayers using tax software. These stronger steps will protect taxpayer accounts by creating stronger verification of customers. This effort will include creation of security questions and device identity recognition at the time of log-on — both steps being used in the financial sector.

“We are taking new steps upfront to protect taxpayers at the time they file and beyond,” Koskinen said. “Thanks to the cooperative efforts taking place between the industry, the states and the IRS, we will have new tools in place this January to protect taxpayers during the 2016 filing season.”

In addition to the states and companies from the private sector, the summit team includes several groups including 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). A wide variety of groups have also joined in supporting the summit effort, including Free File Inc., the National Association of Computerized Tax Processors, the Network Branded Prepaid Card Association and the Financial Services Roundtable.

If you have any questions or concerns, contact Neikirk, Mahoney & Smith PLLC at 502-896-2999.

IRS Removes Automatic W2 Extensions

The Internal Revenue Service has issued final and temporary regulations removing the automatic 30-day extension of time to file information returns on forms in the W-2 series, with the exception of Form W-2G, in an effort to combat tax-related identity theft, starting in 2017, according to an article in Accounting Today by Michael Cohn.

They are doing this to fight identity theft.

If you'd like to read the entire article, click here.