Why are identity thieves targeting taxpayers? The Social Security number is a big reason. Every time your SSN is passed from one party to another, including tax professionals, your risk for identity theft increases. Scam artists also impersonate taxpayers and attempt to file fraudulent tax returns, in hopes of securing a check. That’s why it’s important that everyone involved works to protect taxpayer data.
The IRS announced in August 2018 that it would reformat individual tax transcripts to reduce identity theft and fraud. The new system will redact PII, or personally identifiable information, in the interest of protecting your identity. This affects getting transcripts online, by mail, or Transcript Delivery System.
Tax Season is Also Cybercrime Season
According to IBM Security, in 2017 internet scams amounted to $445 billion swindled. “We had about 75 tax professionals report that they had been victims of some sort of a taxpayer breach. So that unfortunately is a 60 percent increase for the same period of time last year,” said IRS Spokeswoman, Cecilia Barreda.
Don’t panic! The IRS is advancing their security with leaps and bounds, keeping pace with the overall world tech market. The IRS can utilize new automated intelligence to identify scammers and block scammers from the filing system.
Changes for Taxpayers
In 2015 the IRS found a loophole in the Get Transcript application online, which led to a breach of 334,000 taxpayer’s transcripts by identity thieves. The new format is a stronger effort to prevent future incidents, and taxpayers will see the following changes when tax season comes:
- Less sensitive information required. Taxpayers will only need the last four digits of their SSN, last four characters of their last name, etc.
- A new Line 5b for a 10-digit Customer File Number on forms.
- Past information will remain available.
- A new transcript for income verification utilizing the Customer File Number.
The new Customer File Number (CFN) will eliminate the need to use social security numbers by third parties. They can use the CFN instead.
AI for the IRS
The IRS is also beefing up their use of automated intelligence. In 2018, the Government Accountability Office reported an improvement in their Return Review Program with thanks to developments in AI.
Automated Intelligence can help the IRS identify anomalies in tax returns that may indicate different types of tax fraud. But this is only the tip of the AI iceberg, and we expect continued advancements for the government agency in the coming years.
Taxpayers will have less leniency when it comes to under-reporting, thanks to the improved technology.
The IRS has provided an example of the new Tax Return Transcripts online. If you have more questions regarding the new Tax Forms or need guidance on accounting and finance, reach out to our team of tax specialists and financial professionals at DCA Certified Public Accountants.