IRS Sees Big Drop in Identity Theft, Stolen Tax Refunds

The Internal Revenue Service headquarters building in Washington. (AP Photo/J. David Ake, File)

The IRS is seeing a big drop in the number of tax refunds stolen by identity thieves after the agency teamed up with tax preparers to fight the problem, IRS Commissioner John Koskinen said on Tuesday.

The number of victims was nearly cut in half last year, compared to the previous year. At the same time, he said, more businesses are being targeted.

In 2015, identity thieves stole nearly 700,000 tax refunds from the IRS. Last year, the number dropped to 377,000.

Koskinen said thieves have stolen 107,000 refunds in the first five months of this year.

Identity thieves steal refunds by obtaining private information about victims — Social Security numbers, birth dates and income data — and using it to file fraudulent tax returns in their name.

Victims then have to go through a sometimes lengthy process to get their legitimate tax refund.

The IRS is a popular target for sophisticated identity thieves because the agency issues more than $300 billion in tax refunds each year. Several years ago, the IRS started teaming up with the major tax preparers to crack down on the problem.

The IRS has updated its computer filters to identify more fraudulent tax returns while tax preparers have stepped up their security.

“They are having more trouble getting past our security protections in our tax processing systems, so they are increasingly taking aim at the places where large amounts of taxpayer data reside,” Koskinen said.

“That means trying to access data belonging to tax return preparers and other tax professionals, as well as the payroll community, small employers and human resources departments,” Koskinen said.

One ploy involves thieves emailing workers in the payroll department of a large employer, masquerading as a supervisor seeking W-2 information about other workers.

The payroll worker thinks they are emailing the information to the company CEO but “instead of going to the CEO, it goes to someone in Belarus,” Koskinen said.

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