A W-2 Verification Code test will be expanded to cover about 50 million forms in the next season, one of several steps formulated by the Security Summit. The Summit, which is comprised by the Internal Revenue Service, software companies and other leaders in the tax preparation industry, was formed last year to combat identity theft and released plans for 2017 this week.The IRS says utilizing the steps implemented through the Summit last year it stopped $1.1 billion in fraudulent refunds claimed by identity thieves on more than 171,000 tax returns from January through April. The agency reported that compared to $754 million in fraudulent refunds claimed on 141,000 returns for the same period in 2015.
"We have made significant progress in this effort over the last year, but much more work remains," IRS Commissioner John Koskinen said. "The Summit group will expand our efforts in the coming year, and we will work hard to take new steps to combat the rapidly evolving identity theft and refund fraud schemes."
The W-2 code program provides a 16-digit code that taxpayers and tax preparers enter when prompted by software for selected forms. The code helps validate both the taxpayer's identity and information on the form.
Another step will be identifying additional data elements from tax returns to help improve authentication of the taxpayer and identify possible identity theft scams, along with sharing data elements from corporate tax returns.
As a result of the Summit, an Identity Theft Tax Refund Fraud Information Sharing & Analysis Center will be launched next year to serve as early warning system for its to collect and analyze tax-related identity theft schemes. A process will also be created for financial institutions to identify questionable state tax refunds and return them to states for validation. So far, 23 states have joined this initiation.
The Summit's publicity campaign for tax preparers will be expanded to make sure they can protect themselves from cyberattacks and to safeguard taxpayer data.
