Working to Fight Tax Season Fraud

March 07, 2017

Data Shows Significant Drops in Fraudulent Returns Processed, Identity Theft Affidavits

WASHINGTON—(March 7, 2017)--With tax season underway, millions of Americans are working to file their taxes by the April 18 deadline in the hopes of receiving a refund. Unfortunately, many criminals take advantage of this time, using stolen identities and falsified returns to deprive hard-working Americans of their money.  In fact, the IRS just released its annual “Dirty Dozen” tax scams for 2017 to increase awareness of some of the shady tactics fraudsters are using.

But the IRS isn’t fighting the battle against tax refund fraud alone. As prepaid cards continue to be an increasingly popular method to receive tax refunds, the industry has made identifying and combating fraud and protecting consumers a year-round priority. This includes participating in the IRS Security Summit and working alongside other stakeholders, including traditional financial institutions, members of the tax preparation community, and state governments, to ensure the security and integrity of tax refund disbursements.

“Although it was only created in 2015, the Security Summit has already achieved measureable success in decreasing stolen identity refund fraud,” said Brad Fauss, president and CEO of the Network Branded Prepaid Card Association (NBPCA). “We are working with others in the tax industry to develop solutions that better protect consumers against criminals who steal personal information—including names, dates of birth, Social Security numbers—and file falsified tax returns. Our goal is to work with the IRS, the states and other stakeholders to limit the American taxpayer’s exposure to criminal activity specifically designed to steal their hard-earned money.”

Among other initiatives, the Security Summit has implemented an information sharing and assessment center (ISAC) and finalized a uniform Automated Clearing House (ACH) tax refund file-naming convention for states to help the industry identify incoming state tax refunds. The ISAC enables all of its constituencies to share real-time information regarding fraudulent activity, helping to track and respond to fraud trends. The common ACH naming convention makes state tax refunds easier to identify, enhances the review process to mitigate stolen identity refund fraud, and permits the return of fraudulent tax refund disbursements to the states.

These changes have led to what IRS Commissioner John Koskinen called “remarkable progress in our efforts to protect taxpayers” as the number of fraudulent returns processed by the IRS fell by 50 percent in 2016. Additionally, there was a 50 percent drop in the number of people who filed affidavits with the IRS claiming identity theft. 

Due to the work of the IRS Security Summit and the existing robust consumer protections, consumers choosing to receive their tax refunds through prepaid cards can be assured of security without sacrificing convenience. These cards can be procured without a credit check, which is especially helpful for those without access to a bank account or with little or no credit, and then conveniently used at millions of locations, including online.

“For the millions of Americans without a traditional bank account, whether by choice or because they don’t qualify, prepaid cards provide a safe place to store and use funds, while avoiding the check cashing and money order fees typically charged by alternative financial service providers,” said Fauss. “These same benefits don’t just apply to those using prepaid cards in their everyday lives, but also to tax filers expecting a refund, who can securely receive money in a timely fashion by selecting prepaid cards.”

For more information on the IRS Security Summit’s work, visit their website here