The IRS added 23 new data elements to its tax return computer system filters this past tax season. The objective of these enhanced features was to locate instances of identity-theft related tax fraud. These efforts are being made to protect taxpayers from identity theft and prevent fraudulent tax returns from being filed.
As of March 25, 2016, the IRS filters identified approximately $4.1 billion in suspected identity theft tax fraud. Of that amount, $72 million (21,000 tax returns) can be attributed to the three new data elements. The new data elements also prevented 24,000 taxpayer returns from being incorrectly flagged for fraud.
An official report was conducted by the Treasury Inspector General for Tax Administration (TIGTA). In this report, the TIGTA recommends that the IRS remove the three new data elements that resulted in fraudulent activity so inappropriate use cannot continue to occur. TIGTA also recommended that the IRS conduct a thorough audit of its public website and publications and implement a secure process for those who need it to access certain information, such as developers of tax software.
The IRS plans to keep the three removed data elements confidential. The TIGTA agreed with this position to limit public exposure and helped to eliminate the data from the IRS’s website and public documents.
It is important to remember that the new IRS data filters identified alleged instances of identity theft tax fraud. Those who are accused of such offenses are innocent until proven guilty and should seek advice and counsel from an attorney who is experienced with tax crimes.