2023 Tax-Filing Season Sees Increased Use of Filters and Successful Fraud Detection
In its ongoing efforts to tackle identity theft and prevent the issuance of fraudulent refunds, the IRS has implemented nearly 70 additional filters for the 2023 tax-filing season. These filters have proven to be effective, according to a report by the Treasury Inspector General for Tax Administration (TIGTA). The number of identity theft filters utilized by the IRS has increased to 236. These filters analyze various criteria, including income, withholding amounts, filing requirements, prisoner status, taxpayer age, and filing history, to identify potentially fraudulent returns.
Enhanced Fraud Detection Measures:
Tax returns flagged by these filters undergo additional review, during which the IRS verifies the taxpayer’s identity. If identity confirmation is not possible, the tax return is removed from processing. As of March 2, the IRS had identified approximately 1.1 million tax returns. This is equal to refunds totaling around $6.3 billion for further review due to the identity theft filters. Although slightly lower than the previous year’s figures of 1.2 million tax returns and $6.5 billion in refunds flagged as potentially fraudulent. The increased filters have contributed to improved detection.
Impact on Fraudulent Returns and Refunds:
During the 2023 tax-filing season, the IRS confirmed 12,617 tax returns as fraudulent, successfully preventing $105.3 million in fraudulent refunds from being issued. These figures represent a significant increase compared to previous years. A nearly 40.5% rise from early March 2021 and a substantial increase from early March of the previous year.
Identity Protection Personal Identification Number (IP PIN):
To assist identity theft victims, the IRS automatically issues an Identity Protection Personal Identification Number (IP PIN) if their case is resolved before the start of the next filing season. Additionally, taxpayers across the country can request an IP PIN directly from the IRS. That is, if they are concerned about the theft of their personal information during tax return filing. The IP PIN serves as an authentication number known only to the taxpayer and the IRS. This confirms the correct ownership of the Social Security number or Individual Taxpayer Identification Number listed on the tax return. As of March 4, the IRS had issued 802,449 IP PINs to taxpayers.
By implementing additional filters, conducting thorough identity verification processes, and issuing IP PINs, the IRS has made significant progress in detecting identity theft and preventing fraudulent refunds. These enhanced fraud detection measures aim to safeguard taxpayers and maintain the integrity of the tax system.