Tax jurisdictions are prime targets for hackers and scammers. Identify theft of a person’s social security number, date of birth, W-2 information, and other data allow thieves to file false tax returns and claim false refund claims.
What are states doing to combat ID theft? The first line of defense is that states are delaying the issuance of refunds to allow them more time to verify that the tax returns filed are actually those of the taxpayer and not those of a thief. Taxpayers’ situations are not static and can change significantly during the tax year (e.g., new job paying a higher salary, additional dependent, marital status change, etc.) Accordingly, working with your tax professional during the tax year to ensure that significant overpayments are not made is more important today than ever.
Four states (AL, IL, OH, NY) require that taxpayers who e-file their returns provide their driver license information. Some states allow taxpayers to provide this information on a voluntary basis. It has been rumored that New York does not have the infrastructure for the Department of Revenue to check the driver’s license information with the NY Department of Motor Vehicle.
Alabama has announced that it is launching a pilot program this year that will allow residents to more “securely” file their taxes by using an app that verifies their identity with a selfie. Those who try it out are promised faster processing and a quicker return. Alabama is being proactive in combating ID theft and the issuance of false refunds. Alabama is testing an app called “eID”.
Perhaps the bigger question is whether this step will make it more difficult for criminals to file fraudulent tax returns, or will this system place a big bulls eye on Alabama’s tax system and subject its taxpayers to more ID theft? On the app developer’s website, there’s a sentence that reads, “Currently the eID is being tested to secure online tax refunds, over time, the eID can be used to facilitate secure online transactions, like applying online for benefits, travel and more.” eID was built by Morpho Trust, the same company that built and maintains the facial recognition databases for the Department of State and the Department of Defense. Let’s hope that Morpho Trust does not create a nightmare scenario where the states’ refund facial recognition database is not crossed with the facial recognition federal database of terrorists.
If you’re concerned about tax fraud, your best course of action may be to follow the advice of the IRS which instructs taxpayers to file as early as possible.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.