IRS crackdown on identity theft has slashed fraud by 64% since 2015

Instances of identity theft against individuals have plummeted by 64 percent since 2015, thanks to a continued effort by the U.S. International Revenue Service to spread awareness and catch fraudsters.

the IRS announced this week that it saw just 107,000 taxpayers report being victims of identity theft in the first five months of 2017. That compares to 204,000 instances in the same period of 2016 — representing a year over year drop of 47 percent.

The statistics are even more impressive when compared to the first five months of 2015, when nearly 297,000 people indicated they were identity theft victims. That means that in the span of just two years, the IRS has managed to reduce instances of identity theft by nearly two-thirds.

In early 2016 alone, the IRS prevented $1.1 billion in fraudulent returns, saving serious cash for both taxpayers and the US. government. In comparison, $754 million in fraudulent refunds were stopped in 2015.

The improved efforts stem from the IRS Security Summit, which convened in March of 2015 to stamp out fraud and identity theft in tax returns. Despite a short development window, a number of actions were taken in preparation for the 2016 filing season, helping to curb fraud and theft and causing a major increase in efficiency.

This year, the IRS implemented new rules to further prevent identity theft and tax fraud, in the form of the Protecting Americans from Tax Hikes Act. The law mandated that the IRS held onto refunds claiming an Earned Income Tax Credit or Additional Child Tax Credit until mid-February.

While the delay helped investigators by providing more time to dig into potential illegal activities, they also may have hurt lower- and fixed-income citizens, who had to wait longer to receive their tax returns this year.

The IRS also included identity theft among its “Dirty Dozen” tax scams for 2017, helping to publicize the issue and educate the public about what it can do to stamp out fraud. Tips provided include using a firewall and antivirus, learning to recognize phishing emails and phone calls from con artists, and keeping documents like your Social Security card secure.

“The IRS, state tax agencies and the tax community have worked hard to turn the tide against tax-related identity theft, IRS Commissioner John Koskinen said. “We’re making progress in protecting individuals but we still have more work to do, especially in the business tax area and involving tax professionals. Continued lapses in simple security measures can happen in tax professional offices and other business as well as at home.”

Despite the good news for individuals, the IRS did warn this week that it saw an increase in business-related tax return identity theft. While growing at a significant rate, the numbers remain relatively small: 10,000 potential identity theft returns were identified through June 4, compared to about 4,000 in calendar year 2016, and 350 in 2015.

And though the number of businesses affected is low, the dollars at play are significant, with the IRS estimating that $137 million were affected this year. Despite having less than half as many instances in all of 2016, the sum of affected money reached $268 million for businesses.

Koskinen said it’s particularly difficult to identify fraudulent tax returns based on information stolen from professional tax preparers. Such data makes it easier for fraudsters to bypass anti-fraud investigations.

“We need help from the tax community to combat cybercriminals and raise security awareness,” Koskinen said. “That’s why we launched a campaign this summer aimed at tax professionals called ‘Don’t Take the Bait.’ We want all tax professionals to be aware of the threats and to take the necessary security steps to protect their clients’ most sensitive information. A lot of tax professionals think a data breach can’t happen to them. Unfortunately, we see new victims every week.”