IRS: More companies hit by ID scams
Agency sees upswing in business-related fraudulent filings
Tax refund identity theft scams that target U.S. businesses are increasing, even as similar frauds aimed at individual American taxpayers are dropping, the IRS warned Tuesday.
The past few years have seen an upswing in fraudulent filings of the tax return form used by corporations, as well as the separate form used by closely-held corporations, sometimes including partnerships or limited liability companies, the IRS said.
Federal investigators identified roughly 10,000 business-related tax returns potentially involving refund fraud through June 1 of this year’s tax filing year. The total marks a jump from approximately 4,000 during all of 2016 and 350 for 2015, the tax agency said.
Although the absolute numbers were relatively modest, the IRS said the dollar amounts involved were significant: $137 million so far for 2017; $268 million in 2016 and $122 million in 2015.
The increases represent a new trend in tax refund fraud, a continuing problem that included an embarrassing 2015 breach in which cyber thieves stole as much as $39 million in federal refunds based on personal identification data hacked from more than 700,000 taxpayer accounts on an IRS website.
Speaking in a conference call with media organizations, IRS Commissioner John Koskinen said the disturbing new trend comes even as efforts by a publicprivate partnership and new government procedures have dramatically reduced refund frauds against average Americans.
Following several years when Koskinen said the scams “threatened to overwhelm the nation’s tax system,” the number of individuals victimized by tax refund identity theft dropped to 376,500 last year, a 46% decline from 698,700 victims in 2015, IRS data show.
The trend has continued this year, with 107,000 individual victims through May, down from 204,000 for the same period of 2016 and 297,000 in 2015.
“It’s the logical next place to go,” Koskinen said of scammers switching focus from individuals to businesses — which typically have comparatively higher feder- al tax refunds.
He credited the decline in tax refund frauds against individual taxpayers to crackdown efforts by an information-sharing partnership launched in March 2015 by the IRS, state tax officials and tax industry professionals and organizations, including tax software companies.
As part of the effort, tax-preparation firms gave the IRS information about their review of the electronically filed tax returns, including any improper or repetitive use of the electronic addresses where the filings originated. The companies and the IRS also shared information about computer device identification data linked to the tax returns’ origin, as well as metadata from the transmissions.
In an effort to drive down tax refund frauds against corporations and partnerships, the IRS and other members of the partnership have urged tax preparers to increase security safeguards against identity thieves.
For the 2018 tax filing system, the IRS also plans to ask tax professionals to gather more information about their business clients. The information includes the name and Social Security number of the company officer authorized to sign the business tax return, tax payment history for the firm, information about any parent company and recent tax filing history.
“The battle is ongoing,” Koskinen said.