Tax fraud squad stopped $1.1 billion in fraudulent refunds

America’s tax fraud squad stopped $1.1 billion in fraudulent tax refunds and suspended $148 million in additional refunds that were “suspicious” during the recent tax filing season, the Internal Revenue Service said Tuesday.

Tax-related companies and government agencies banded together last year in a concerted effort to prevent tax and identification fraud and the fake refunds that they generate. Tuesday’s report from the IRS offered an update on the recently completed tax filing season and plans for next year.

The IRS said the efforts of the Security Summit Group meant the tax agency received fewer claims of identify theft, specifically Form 14039, and banks rejected fewer refunds as suspicious. The aim is to provide a safer and more secure tax season for filers.

“This is an ongoing, ever-evolving battle,” IRS commissioner John Koskinen said during a news conference. “Whatever system we design now … we can’t assume is the answer forever.”

Anti-fraud efforts combined the resources of the IRS and state tax authorities with private companies such as H&R Block, Intuit and Green Dot, a prepaid debit card company. They shared information across companies and government agencies to make it easier to ferret out schemes during the tax season and to alert one another when problems surfaced.

Corporate and state officials noted the benefits for all groups sharing information and working together.

Bill Cobb, chief executive of H&R Block, noted his company and TurboTax maker Intuit are among the most fierce competitors. But he said he and Intuit chief executive Brad Smith are “completely aligned” in the battle against tax identity fraud.

Taxpayers notice few of the efforts, but some actions hit them directly. For example, Koskinen said, the IRS shut down the electronic filing PIN system that thieves had targeted. A cyberattack compromised more than 100,000 e-File PINs, leading the IRS to shut down the system last week, earlier than it had planned.

New efforts for next tax season include a pilot that will expand a 16-digit W-2 verification code test to cover 50 million forms. Tax software will prompt taxpayers and preparers to enter the code to validate the taxpayer’s identity.

The Identity Theft Tax Refund Fraud Information Sharing & Analysis Center will open with an eye on collecting data on and analyzing tax-related identity theft schemes. It will collect and share information more easily and in real time, Koskinen said. It also will generate a database that doesn’t exist now and allow new analysis to be done.

Banks also will have a new way to identify questionable state tax refunds and return them to the states for verification.

Koskinen said the group also will work more with tax preparers because tax thieves seem to be focusing on them in efforts to steal identities.

This story was originally published June 28, 2016 at 11:13 AM with the headline "Tax fraud squad stopped $1.1 billion in fraudulent refunds."