American Coalition for Taxpayer Rights (ACTR): Assisting IRS and States in Combatting Stolen Identity and Tax Refund Fraud (SIRF)

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1 American Coalition for Taxpayer Rights (ACTR): Assisting IRS and States in Combatting Stolen Identity and Tax Refund Fraud (SIRF) August 2016 Stephen M. Ryan, Esq. David D. Ransom, Esq. Boston Brussels Chicago Düsseldorf Houston London Los Angeles Miami Milan Munich New York Orange County Rome San Diego Silicon Valley Washington, D.C. Strategic alliance with MWE China Law Offices (Shanghai) 2010 McDermott Will & Emery LLP. McDermott operates its practice through separate legal entities in each of the countries where it has offices. This communication may be considered attorney advertising. Previous results are not a guarantee of future outcome. The following legal entities are collectively referred to as "McDermott Will & Emery," "McDermott" or "the Firm": McDermott Will & Emery LLP, McDermott Will & Emery/Stanbrook LLP, McDermott Will & Emery Rechtsanwälte Steuerberater LLP, MWE Steuerberatungsgesellschaft mbh, McDermott Will & Emery Studio Legale Associato and McDermott Will & Emery UK LLP. These entities coordinate their activities through service agreements. This communication may be considered advertising under the rules regulating the legal profession.

2 Who Is ACTR and How Has It Partnered with IRS? ACTR is a 501(c)(6) The 13-member Coalition is made up of two components: (1) tax preparation and tax software companies, and (2) financial services settlement companies. ACTR members assist in the preparation and electronic filing of more than 94 million of the approximately 146 million individual federal income tax returns in ACTR members provide about 19 million of the nearly 21 million Refund Transfers (RTs) chosen by taxpayers each year. 2

3 Who Is ACTR? (Continued) The tax preparation companies electronic filing offerings range from: -- In-person (brick-and-mortar) tax preparation -- Do-It-Yourself (DIY) software -- Professional software (used by CPAs, attorneys, enrolled agents and independent tax preparers) The financial services settlement companies primarily offer and facilitate the Refund Transfer (RT), which: -- (1) facilitates various refund disbursement methods (e.g., direct deposit, cards, checks) for taxpayers; and -- (2) are compliant with federal banking regulations. 3

4 Who Is ACTR? (Continued) ACTR tax preparation and tax software companies: -- H&R Block -- Intuit -- Jackson Hewitt -- Liberty Tax -- TaxACT -- TaxSlayer -- CCH Small Firm Services (UTS) -- OnLine Taxes Inc. -- TaxHawk ACTR financial services companies: -- Metabank/Refund Advantage -- Republic Bank & Trust -- Santa Barbara Tax Products Group -- NetSpend 4

5 IRS Initiates Federal-State-Private Industry Security Summit to Detect and Prevent SIRF IRS Commissioner Koskinen convened and kicked off IRS-State-Industry stolen identity tax refund fraud Summit in March IRS, States and industry stakeholders signed onto a Memorandum of Understanding obligating the parties to share and exchange information in an effort to combat SIRF. Duties and responsibilities of the parties: -- Authentication -- Leads Reports -- Information and Analysis Center (ISAC) on SIRF Continuing dialogue and interaction. Privileged and Confidential/Attorney-Client Communication -- July

6 What Fraud Is the Security Summit Addressing? Stolen identity tax refund fraud Account takeovers Breach Identities for sale on the black market/dark web Privileged and Confidential/Attorney-Client Communication -- July

7 Establishing an Information Sharing and Analysis Center (ISAC) for Tax IRS, States and Industry met with representatives of ISACs designed for FAA (commercial air safety), financial services and the health insurance industry. ACTR regards the establishment of an IRS-led Information Sharing and Analysis Center (ISAC) as the critical structural glue to the continued success in responding to stolen identity refund fraud (SIRF). IRS, states and industry must be able to share information that helps educate them on threats. ACTR sees IRS as leading this ISAC effort. Essential that ISAC be stood up as soon as possible. Privileged and Confidential/Attorney-Client Communication -- July

8 ACTR Members Participation in IRS-State- Industry Summit Process Financial Services Working Group Tax Products Group Authentication Working Group TaxSlayer Communications Working Group Intuit Information Sharing Working Group TaxACT ISAC Working Group HR Block Cyber-Security STAR Working Group HR Block & Intuit Tax Professional Working Group -- CCH 8

9 Challenges in Combatting SIRF Adequate IRS funding from Congress to address the problem. Funding from Congress for an ISAC. Other issues, including legal barriers designed to protect taxpayer privacy ( 6103, 7216). 9