Payment history, parent company information, and tax filing history are among the new documentation materials the IRS may request from practitioners when they file business, trust, or estate returns for the 2018 tax season. The Internal Revenue Service will also ask for the name and Social Security number of the individual who signs the tax documents and additional information based on deductions claimed, the agency said in a July 25 news release (IR-2017-123).
The move is part of the IRS's campaign to protect taxpayer information in business-related tax returns that criminals use to file fraudulent claims, IRS Commissioner John Koskinen said in a July 25 conference call with reporters.
In the past year, the agency has seen an uptick in the number of fraudulent business-related returns. The affected returns include: Form 1120, U.S. Corporation Income Tax Return; Form 1120S, U.S. Income Tax Return for an S Corporation; Form 1041, U.S. Income Tax Return for Estates and Trusts; and Schedule K-1, Partner's Share of Income, Deductions, Credits, etc., according to the release.
"This shows that identity thieves are constantly working to come up with new ways to get around the barriers we've put up. That's why we're working to put more taxpayer protections in place for the 2018 filing season coming up. We'll be sharing more of those details at a press conference later this fall," Koskinen said.
The agency's new plan is a "very significant development," said Victoria Abramov, a tax principal with Berdon LLP.
"Trust and estate income tax returns are literally a treasure trove for identity thieves. These documents not only contain information relating to the trust or estate itself, they also contain links to K-1s of all the beneficiaries, allowing the thief to mine even deeper," Abramov said in an email.
Signs of ID Theft
To alert practitioners, the IRS listed signs of identity theft, such as e-file returns and extension requests rejected because the return's employer identification number or Social Security number is already on file. Other signs include the receipt of a tax transcript or IRS notice to a taxpayer that doesn't correspond to anything on file and the lack of routine IRS correspondence because the thief changed the address.
The IRS has been working with the Security Summit-a partnership with the software industry, tax preparation firms, payroll and tax financial product processors, and state tax administrators-to identify ways tax practitioners can protect client data.
2017 Filing Season Data
Individual taxpayers reporting identity theft has decline by two-thirds. The Security Summit's efforts have contributed to that decline, Koskinen said, citing new statistics from the tax filing season.
"In the first five months of 2017, about 107,400 taxpayers reported they were victims of identity theft, compared to the same period in 2016 when 204,000 filed victim reports," he said. "That's about 96,000 fewer victims-representing a drop of 47 percent."
In comparison to the same period in 2015, the IRS had nearly 297,000 identity theft victims during the first five months of 2015, according to Koskinen.
"This stunning decline over two years is the direct result of continued good work by IRS employees and the ongoing efforts of our partners in the private sector and state tax administrators," he said.
With assistance from Allyson Versprille in Washington.
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Reproduced with permission from Daily Tax Report, 142 DTR G-4 (July 26, 2017) Copywright 2017 by The Burea of National Affairs, Inc. (800-372-1033) http://www.bna.com