As CPAs, we are getting calls from clients that are being asked for additional verification from the IRS before refunds are paid. This can not only delay the anticipated refund but cause concern and additional paperwork in processing the verification request. This does not mean your tax return was incorrect or your preparer made a mistake.

Over recent years, the IRS has seen a decline in identity theft due in large part to their efforts to combat tax-related identity theft with an aggressive strategy of prevention, detection, and victim assistance. They are making the progress against this crime one of their highest priorities. Also, having made some progress, they feel increasing their efforts will continue to pay off. This is where we taxpayers get a headache.

“Identity theft occurs when criminals use taxpayers’ Social Security numbers and birthdates to fraudulently obtain tax refunds. The IRS stopped nearly 1 million fraudulent refunds from being issued last year, totaling almost $6.6 billion, according to the agency.”

The IRS has always had verification measures in place but fraud is now much more sophisticated, thieves can get fraudulent refunds on prepaid debit cards that are not linked to bank accounts, and this is being done before you even file your actual return.

“In recent years, the IRS has beefed up its computer filters to identify potential fake tax returns. If there are dramatic differences in a taxpayer’s return from year to year, it might get flagged for additional review. We recognize that enhanced security will increase the challenge for taxpayers.”

We are also seeing random verification requests from the IRS. Stricter verification to ensure that refunds go only into proper bank accounts and ask you to provide your AGI from last year to improve authentication and identify possible identity theft scams. All of this sounds good until you are the one being asked to verify information prior to receiving your refund. If you receive an IRS request for verification, read through the letter, supply the information requested, and contact us with any questions. You can access more details on the IRS initiatives here.

Remember that the IRS’s goal is to make sure that you, and only you receive your refund. This might reduce your chance of a “headache”.

By Dan DeHoek, CPA | ABV | CFP®