IRS Updates
Columbus Area Tax Administrators
Dennis Bell, Senior Tax Specialist
January 21, 2015
What is identity theft?
Identity theft occurs when someone uses your
personal information such as your name, Social
Security Number (SSN) or other identifying
information, without your permission, to commit
fraud or other crimes
IRS’s response to identity theft
•
•
Stopping identity theft and refund fraud is a top
priority for the IRS. The agency’s work on
identity theft and refund fraud continues to
grow, touching nearly every part of the
organization.
For the 2013 filing season, the IRS expanded
these efforts to better protect taxpayers and
help victims.
Increasing efforts to help victims
•
•
In calendar year 2013, the IRS worked with
victims to resolve and close more than
963,000 cases of tax-related identity theft.
In calendar year 2013, the IRS suspended or
rejected 5.7 million suspicious returns worth
more than $17.8 billion.
Types of tax-related identity theft
•
•
•
Refund-related identity theft
– Identity thief uses a stolen SSN to file a
forged tax return and obtain a fraudulent
refund.
Employment-related identity theft
– Identity thief uses a stolen SSN to obtain
employment.
Business-related identity theft
– Identity thief uses a business’s identifying
info without authority to obtain tax benefits.
Criminal investigation
of identity theft
Increased investigations
• Tax-related identity theft is a national priority
for IRS Criminal Investigation.
• During fiscal year 2012, IRS Criminal
Investigation initiated 890 identity theft
investigations.
• During FY 2013, an additional 1,492 cases
were investigated.
Preventing online identity theft
•
•
•
•
•
•
•
•
•
Don’t respond to suspicious IRS emails,
Texts and faxes.
Secure your computers (i.e., firewalls, antivirus/anti-phishing/anti-spam, etc.).
Use strong passwords.
Back up critical personal information
Limit the personal information you provide
on social media.
Never answer ‘yes’ to pop-up screens
Visit onguardonline.gov.
Suspicious IRS-related
communication
If you or a client receive a suspicious
communication claiming to be the IRS:
• Go to IRS.gov, scroll to the bottom of the
homepage and click on ‘Report Phishing.’
• Report all unsolicited email claiming to be from
the IRS to phishing@irs.gov.
Assisting ID theft victims
•
•
•
Call the Identity Protection Specialized Unit at
800-908-4490.
Complete the Form 14039, Identity Theft
Affidavit, with all documentation.
Take additional “non-tax” identity protection
steps
– File police report.
– Place fraud alert on credit accounts by
calling one of the credit bureaus.
– File a complaint with the Federal Trade
Commission at www.FTC.gov.
Business-related identity theft
Business Master File identity theft
•
•
Business Master File, or BMF, identity theft is
defined as creating, using or attempting to use
a business’s identifying information, without
authority, to obtain tax benefits.
The following examples represent situations
that may be due to identity theft related to the
fraudulent use of business information.
Examples of BMF identity theft
Example 1:
• An identity thief files a business tax return
(Form 1120, 720 etc.) using the Employer
Identification number of an active or inactive
business to obtain a fraudulent refund.
Examples of BMF identity theft
Example 2:
• An identity thief, using the EIN of an active or
inactive business, files fraudulent Forms 941
and W-2s to support a bogus Form 1040
claiming a fraudulent refund.
Examples of BMF identity theft
Example 3:
• An identity thief obtains an EIN using the
name and Social Security number of another
individual as the responsible party, then files
fraudulent tax returns (Form 941, 1120, 1041
etc.) to avoid paying taxes, obtain a refund, or
further perpetuate individual identity theft or
fraud.
Business-related identity theft
Business Master File Identity Theft
•
•
•
•
In January, 2014, PGLD released BMF identity theft
program guidance, policy and procedures. The new
BMF procedures included:
Form 14039-B, and electronic form designed for
employees to use when they require taxpayers to
provide supporting BMF identity theft
documentation.
BMF identity theft tracking indicators used to mark
EINs affected by identity theft.
Mandatory research requirements needed in support
of a BMF identity theft determination.
Protecting businesses from
identity theft
Businesses can take practical measures to reduce the
risk of tax-related identity theft:
•Protect the organization’s federal tax identification
number as you would a personal identification number.
•Only provide your organization’s federal tax
identification number and other sensitive information
when necessary.
•Verify the security of any website through which your
organization transmits sensitive data.
•Properly dispose of sensitive company documents (for
example using a micro-cut shredder).
•Increase identity theft awareness within your
Dealing with tax-related
identity theft
If you suspect your organization has been compromised
by business identity theft, take the following steps:
•File a report with local law enforcement.
•Contact the major business credit agencies, including
Equifax, Experian, TransUnion and Dunn and Bradstreet,
to report the fraudulent activity and obtain a credit report
to check for additional fraudulent activity.
•Contact all credit card companies, financial institutions
and creditors to alert them to the possibility of fraudulent
activity.
•Respond to the IRS notice you received and provide a
detailed explanation of how you believe your
organization has been affected by identity theft.
Protecting your business
and clients
Physical safeguards:
• Lock rooms and cabinets.
• Store records in secured area.
• Protect against destruction and damage.
• Inventory hardware.
• Dispose of information and hardware securely.
Protecting your business
and clients
System safeguards:
• Use strong passwords: Minimum of eight
alphanumeric characters.
• Change passwords periodically.
• Use timed, password-activated screen savers.
• Don’t post or share passwords.
• Encrypt sensitive data when:
•
– Transmitting over networks.
– Storing on servers or media.
Encrypt entire computers, media.
Protecting your business
and clients
More system safeguards
• Don’t store sensitive data on a machine with
an internet connection.
• Back up system periodically on secure media.
• Maintain updated firewalls, anti-virus, software
updates, security patches, anti- spyware and
anti-ad ware.
• Provide central management security tools
and passwords/security protections.
Protecting your business
and clients
If you have a security breach:
• Notify law enforcement.
• Notify the Federal Trade Commission
(www.FTC.gov for contact information).
• Notify customers and business partners.
• Take corrective actions.
• Prevent other breaches.
Additional information
•
Identity theft information
– http://www.irs.gov/uac/Identity-Protection
• Individual identity theft
• Business identity theft
• Data breach information
• Additional resources
• Taxpayer Guide to Identity Theft
The Collection Process
• Begins when a return is filed without paying
the debt in full
• Paying your taxes
– Options for paying in full
– Options if you can’t pay in full now
• Installment agreement
• Offer in compromise
− If you need more time to pay
22
Collection Appeals Options
• Taxpayers can appeal most collection
actions.
• Main options:
− Collection Due Process
− Collection Appeals Program
23
The Collection Process
• Penalties
− Failure to file
− Failure to pay
• Interest
• Abatement
24
Online Payment Agreement
• Streamlined
• Less financial info required
• Maximum time to pay 72 months
• Immediate approval notification
• Eligibility (all required returns filed)
– Individuals less than or equal to $50,000
tax and penalties
– Businesses less
tax and penalties
than or equal to $25,000
25
Online Payment Agreement Application
When applying online, be ready to provide:
authentication information, tax return data
and basic financial information.
26
Online Payment Agreement Application
• Application fees (as of Jan. 1, 2014)
– $120, standard agreement
– $52, direct debit agreement
– $43, applicant meets low income guidelines
• Online system available
– Monday – Friday, 6 a.m. – 12:30 a.m. ET
– Saturday, 6 a.m. -10 p.m. ET
– Sunday, 6 p.m. - midnight ET
27
Offer in Compromise
• Five basic requirements:
− Filed all returns
− Made all required estimated taxes payments
− Current with federal tax deposits
− Can’t pay full amount
− Not in bankruptcy
28
Offer in Compromise
• IRS may accept an offer on three grounds:
− Doubt as to liability
− Doubt as to collectability
− Effective tax administration
29
Offer in Compromise Components
• The completed offer package must include all
of the following items:
– Form 433A or 433B
– Form 656 for each taxpayer
– $186 non-refundable fee
– Non-refundable payment
30
OIC Pre-Qualifier Tool
The OIC Pre-Qualifier tool helps
applicant s confirm eligibility and prepare
preliminary proposals.
31
Audit Reconsideration
Process used by IRS to help taxpayers when
they disagree with the results of an IRS audit of
their tax returns, or returns created for them by
the IRS because they did not file tax returns as
authorized by the Internal Revenue Code
6020(b).
32
Audit Reconsideration Process
• Step 1:
– Review examination report and attachments;
determine which items you feel are incorrect
– Gather documentation needed to support
your position
– Verify supporting documentation is
information that has not been presented
before; ensure it’s for tax year in question
33
Audit Reconsideration Process
• Step 2:
– Make photocopies of documents and attach
them to your letter explaining your request
for reconsideration
– If available, attach copy of examination
report, Form 4549, along with new
documentation supporting your position
– Include a daytime and evening telephone
number and the best time for us to call you
34
EIC Due Diligence
• FY13 improper payments of earned income
credit estimated between $13.3B - $15.6B
• IRS is combating these errors with
– Due diligence requirements
– Due diligence compliance audits
35
EIC Due Diligence
• Due diligence requirements:
−
−
−
−
Complete/Submit eligibility checklist
Compute the credit
Knowledge
Recordkeeping
36
EIC Due Diligence
• Consequences of not meeting due diligence
requirements
– Penalties
– Suspension/expulsion from IRS e-file
– Disciplinary action by IRS OPR
– Injunctions
37
Questions
38
Contact Information
Dennis Bell
614-621-7536
Dennis.c.bell@irs.gov