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Tuesday July 7, 2015

Washington News

Washington Hotline

IRS Identity Theft Fraud Limits

On July 1, IRS Commissioner John Koskinen spoke to CPAs and other tax return preparers at a Tax Forum in Chicago. One of his topics was the continued IRS effort to combat identity theft and tax refund fraud. As part of this effort, starting in January of 2015 there will be a maximum of three electronic refund payments made to any one bank account. Any additional payments will require a paper check.

Koskinen stated, “We realize that there are some legitimate reasons why taxpayers would have multiple refunds going to the same account. Parents may have children named on their bank account, for example. But direct deposit is also an easy way for an identity thief to quickly divert funds to a bank account and cash out, and we want to put a stop to that.”

The new policy is a continuation of IRS efforts to combat identity theft. In 2013, the IRS identified 5.7 million suspicious tax returns. The potential refunds from these returns were $18 billion. The service also started 700 new investigations in an effort to identify potential thieves who are involved in tax refund fraud. Koskinen noted that it had previously taken 300 days to resolve an identity theft case, but the current IRS effort has reduced that to approximately 120 days. He hopes to continue to reduce identity theft in the future.

Another change that he highlighted at the conference is a new Form 1099-K to require reporting about cash transactions. Koskinen noted, “The new reporting requirement was enacted because Congress realized that cash transactions were the source of much of the income underreporting by small businesses.” He noted that some businesses were not reporting cash and therefore generating an unfair advantage against their competitors.

Koskinen offered an example of potential IRS action if there is a discrepancy. He noted, “If nearly all suburban convenience stores report less than 60% of their revenue from payment cards, but one store shows 98%, we can now see that difference, and we might ask the business owner to explain it.”

The IRS will continue to pursue changes that facilitate collection of the proper tax and refund of the appropriate amounts. Commissioner Koskinen believes that this is beneficial for all taxpayers who are currently paying their fair share of taxes.

Published July 4, 2014

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