Four easy ways to combat tax fraud :: Wamhoff Financial & Accounting

Four easy ways to combat tax fraud

  1. The problem:
  2. Changes lawmakers can implement, according to federal and state tax officials
    • Federal and State Tax Officials make the following recommendations to the Senate Finance Committee last week:
    • Make prepaid debit cards easier to identify. It’s difficult to determine whether a refund is going to a prepaid debit card or a legitimate bank account. Prepaid debit cards are hard to trace. If lawmakers required the financial industry to have an identifier in the routing and account number to indicate that it’s a prepaid debit card.
    • Require employers to file W2s with tax agencies earlier. Although employers are required to send W2s to employees by the end of January, they aren’t required to send copies to the IRS until March 31. Many people have already filed returns and claimed refunds at this point. This means the returns filed cannot be verified against the actual W2. Earlier filing of W2s by employers would allow cross checking to raise a red flag on a fraudulent return sooner.
    • Don’t let third party filing fees be deducted from a refund. When criminals have this option through software systems like Turbo Tax, they have nothing to lose – they don’t pay for the filing. Disallowing this practice may deter criminals from filing if they have to pay the fee up-front himself, and could make him or her easier to track down.
    • Do more to educate the public. It’s been reported that fake IRS agents have targeted more than 366,000 people with harassing calls to demand payment. More than 3,000 people have fallen for the scam since 2013, and were conned out of a total of $15.5 million. Older adults are one of the biggest targets. More education will help to keep people for falling for the scam.