We take client protections seriously here at Drake Software. Drake Software is working with the IRS and state tax agencies to implement additional safeguards for the 2018 filing season to curb ID Theft Tax refund fraud. The efforts of the Security Summit have led to greater protections for taxpayers and tax preparers and this partnership has led to significant reductions in tax-related identity theft – it is estimated that this type of refund fraud has fallen by nearly 2/3rds since 2015.

As the IRS has indicated:

“Every tax professional in the United States…is a potential target for highly sophisticated, well-funded and technologically adept cybercriminals around the world. Their objective: to steal your clients’ data so they can file fraudulent tax returns that better impersonate their victims. Their tactics: using email, the phone or other means to trick you into giving up computer passwords, e-Services passwords, to steal your EFINs or CAF numbers or even to take remote control of your entire computer system.”

The Security Summit’s efforts to safeguard your data have led to several security enhancements to Drake Software. One example of this is the enhancement of password protocols for both individual and tax professional software. For the 2017 filing season, the password requirement includes the password expiring every 180 days as well as lockouts in the software after 10 unsuccessful attempts.

Many states have worked with financial institutions to create their own program to help identify suspect refunds. In addition, the IRS continues to pilot a Form W-2 Verification Code that helps verify income information and employers.

According to the IRS, “Practitioners also should complete the “know your customer” information fields that may be on the electronic Forms 1040 and Forms 1120 series.” As part of this you will notice a requirement to complete the “IDS” screen for all individual returns this year in order to e-file the return. A taxpayer may refuse to provide this information, and this may be indicated on the return.

Due to security concerns, not everything the Security Summit partners do is visible to the public or fraudsters. For example, the Summit partners continue to implement information sharing in the Identity Theft Tax Refund Fraud Information Sharing and Analysis Center (ISAC) where emerging identity theft schemes and alerts are shared within the partnership.

The Summit partners also are putting an increased emphasis on identity theft protections for business returns in the Form 1120 and 1041 series. The IRS will be asking tax professionals to gather more information on their business clients. The data being collected assists the IRS in authenticating that the tax return being submitted is actually a legitimate return filing and not an identity theft return. Some of the new questions people may be asked to provide when filing their business, trust or estate client returns include:

• The name and Social Security number of the individual authorized to sign the business return. Is the person signing the return authorized to do so?

• Payment history – Were estimated tax payments made? If yes, when were they made, how were they made, and how much was paid?

• Parent company information – Is there a parent company? If yes, who?

• Additional information based on deductions claimed.

• Filing history – Has the business filed Form(s) 940, 941 or other business-related tax forms?

To help businesses and business return preparers, the IRS has created a new Identity Theft Guide for Business, Partnerships and Estate and Trusts.

At Drake Software, we are committed to providing you with the proper security features that protect your clients and your business. As the IRS has strongly stated “No one can fight this crime alone. It takes all of us working together”. Our continued efforts within the Security Summit allow us to work together with you, the tax professional, to protect taxpayers.