Combating ID Theft with the Help of Payroll Professionals

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1 PENNSYLVANIA STATEWIDE PAYROLL CONFERENCE Indiana University Of Pennsylvania Philip G. Yamalis Senior Stakeholder Liaison October 7, 2016 Future State Resources for Payroll Professionals Combating ID Theft with the Help of Payroll Professionals 1

2 IRS Future State An evolving effort to meet taxpayer needs The Taxpayer Component A central concept of the Future State focuses on taxpayers and how to provide the services they need in the way that works for them. 3 Title / Heading 2

3 The Taxpayer Component A more complete online experience Freeing up resources for those who need 1-on-1 assistance More up-front issue identification when the return is filed Improved authentication to prevent fraudulent returns using stolen identities 4 IRS Future State Ongoing Activities Several projects underway will help us identify areas where we can become more effective, more efficient and/or generate savings to reinvest in the future. 5 Title / Heading 3

4 Common Themes / Focus Areas 1. Aligning IRS resources with priority programs 2. Increasing work stream agility and efficiency 3. Selecting the highest value work 4. Making the best use of employee skills 5. Improving customer service and reducing taxpayer burden 6. Providing taxpayers online options for meeting their tax compliance responsibilities 7. Identifying and deterring non-compliance at the earliest possible time 6 IRS Future State Example Ongoing Initiatives Security Summit Group Taxpayer Assistance Centers Appointment-Based System Improved Online Services Compliance Realignment Identity Theft Victim Assistance Enterprise Records Management 7 IRS Future State 4

5 Example Ongoing Initiatives Early Interaction Initiative (Payroll Taxes) Online Payment Agreements 8 IRS Future State Operational Efficiencies Several projects underway will help us identify areas where we can become more effective, more efficient and/or generate savings to reinvest in the future. 9 Title / Heading 5

6 Key Themes A well-equipped and efficient workforce Analytics / data-driven decisions More flexible work environment Better coordination with internal and external stakeholders 10 IRS Future State For more information, search using keywords Future State on IRS.gov Template 0101 ( ) Department of the Treasury Internal Revenue Service publish.no.irs.gov/design.html 6

7 IRS Resources for Payroll Professionals Search Payroll Professional IRS.gov Bullet (28 pt.) Bullet (28 pt.) Bullet (28 pt.) 7

8 Payroll Professionals Tax Center Bullet (28 pt.) Bullet (28 pt.) Bullet (28 pt.) Local Meetings and Seminars Bullet (28 pt.) 8

9 IRS Video Portal E-Services Conduct business with the IRS electronically Available only to approved IRS business partners Available 24/7 Register online For assistance after registering contact the e-help Desk at

10 Stay Informed with QuickAlerts Receive e-file messages affecting e-file transmitters, software developers and authorized IRS e-file providers Four categories: 1. Alerts 2. Technical 3. General notifications 4. General IRS e-file Service Center messages IRS Social Media IRS2Go app YouTube Tumblr Facebook Podcasts 10

11 Payroll Industry Calls Monthly payroll industry calls First Thursday of each month 1:00 p.m. Eastern IRS & Partners Combat Tax-Related Identity Theft What s New for

12 General Scope of Identity Theft Identity theft costs U.S. victims more than all property crimes combined Identity theft remains number one issue reported to Federal Trade Commission New identity theft victim occurs every two seconds More than 1 billion personal records stolen in 2014 alone Scope of Tax-Related ID Theft 24 million suspicious returns identified $78 billion in fraudulent refunds stopped million suspicious returns in 2015; 1.4 million confirmed IDT returns $11.8 billion total confirmed refund fraud protected in

13 IRS Efforts Against Tax-Related Identity Theft The IRS has: Increased number of filters to 200 from 11 Limited refunds to a single account Locked nearly 29 million deceased taxpayer accounts Improved cooperation with local law enforcement Worked to reduce internal use of SSNs IRS Efforts Against Tax-Related Identity Theft The IRS has: Reduced prisoner tax fraud Established external leads program with financial institutions Recovered $3 billion in erroneous refunds Helped convict about 2,000 identity thieves in recent years; Criminal Investigation has 1,700 open investigations Curbed EFIN abuse 13

14 Security Summit Actions for 2016 Agreed on new trusted customer standards for use of tax software New password standards Lockout features Out-of-band features Identified more than 20 new data elements for submission Improved information sharing Testing a W-2 Verification Code Security Summit Additional Actions Agreed on three new working groups: Financial Services Work Group will focus on tax-time products such as debit cards Communications Work Group will work to increase security awareness among taxpayers Tax Preparers Work Group to bring industry into the dialogue Summit partners reviewing additional steps for

15 Emerging Scams Phishing s posing as IRS e-services Phishing s posing as new clients Spoofing s to payroll personnel requesting all employee Forms W-2 Remote takeover of tax preparer computers Variations constantly emerge Know your clients; know your employees Protect your EFIN IRS reviewing improvements to EFIN safeguards Stepped up efforts to expel EFIN abusers; Increased on-site visits as part of monitoring process EFIN holders should review return numbers during filing season e-services Account updated weekly Excessive numbers can be reported to e-help Desk 15

16 Steps to Protect Client Data Read Publication 4557, Safeguarding Taxpayer Data Review current security measures Create a security plan Use top-notch software security Educate all employees Use strong passwords Secure Wi-Fi Encrypt PII s Backup files Plan Ahead for Data Loss Create a reaction plan for data theft Call IRS Stakeholder Liaison (found on IRS.gov) Notify your State Tax Agency Review Federal Trade Commission s Business Center to assist businesses with data losses Notify police Notify businesses Notify clients 16

17 Form W-2 Verification Code Initiative Verification Code: 16 alphanumeric characters A unique code on each W-2, calculated using data on that form In a separate box, labeled Verification Code, on copies B ("To be filed with employee's federal tax return ) C ("For employee's records") W-2 Instructions: Verification Code: If this field is populated, enter this code when it is requested by your tax return preparation software. It is possible your software or preparer will not request the code. The code is not entered on paper-filed returns. Form W-2 Verification Code Initiative Filing Season 2016: We tested the capability of a 16-digit verification code to validate Form W-2 data submitted with e-filed Forms We worked with four payroll service providers (PSPs) and many 1040 software products. The data from 1.5M Forms W-2 from pilot EINs were included with e-filed Forms After the return processed, IRS independently calculated the VC for these W-2s, using the data on the form and compared it with the code the taxpayer entered. When the taxpayer/preparer input the VC, the validation success rate was over 94 percent. 17

18 Form W-2 Verification Code Initiative Filing Season 2017: We are expanding that test to 50 million W-2s involving multiple payroll service providers and software products. Increasing the number and types of W-2 issuers Increase the number of payroll service providers to include smaller issuers Include large federal organization (National Finance Center) While returns without VCs will not reject, we ask payroll professionals associated with PSPs/employers participating in the initiative to encourage employees to enter the VC at the prompt in 1040 software. IRS will test using the validated VC results in such a way that, if the VC is a match, we ll accept the W-2 data submitted with a 1040 to be valid and reduce false positives. The IRS will be determining the future use of the VC during FS Help us get it right. Thank You! Philip G. Yamalis Senior Stakeholder Liaison Phone Number: Address: Philip.G.Yamalis@irs.gov 18