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the identities of tax lers, in- crease information sharing between the tax preparation industry and government agencies, and raise public awareness of ID theft tax fraud. That plan stemmed from the March 2015 founding
of the IRS’s Security Summit,
a joint public-private partnership tasked with stemming ID theft tax fraud. The summit established several working groups, each focusing on a particular prong
of defense, including authentica- tion, strategic threat assessment and response, and information sharing. The Network Branded Prepaid Card Association (NBPCA) helped the IRS establish a nancial services working group, which is tasked with exploring methods to prevent and deter fraudsters from accessing tax-related nancial products, deposit accounts and prepaid debit cards. The IRS also works with NACHA, the Electronic Payments Association, on ongoing anti-fraud e orts.
But while the IRS has looked to
the payments community—includ- ing prepaid providers—as valuable partners in the ght against refund fraud, some lawmakers have taken a more aggressive stance toward prepaid, noting that scammers often use prepaid cards to receive fraudulent returns. A bill proposed in the House of Representatives
in November calls for regulators
to o cially designate nancial accounts as either “veri ed” or “at-risk,” with the latter being those accounts for which the account- holder’s identity has not been
veri ed by “direct review” of a government-issued photo ID. Titled the Identity Theft and Tax Fraud Prevention Act, the bill
has the same name and includes many of the same provisions as
a Senate bill proposed in March 2015. While neither bill explicitly calls for restrictions on so-called “at-risk” accounts, the designation requirements could open the door to declaring such accounts ineligi- ble to receive certain types of payments, such as tax refunds.
At the state level, Utah’s Tax Commissioner posted a notice on its Website in late 2015 warning that taxpayers who request a
refund be directly deposited
onto a prepaid card “that was not approved by the Tax Commis- sion,” will instead be mailed their refunds via paper check. Further, the commission did not elaborate on exactly which prepaid cards were or were not approved.
But singling out prepaid as a disbursement method isn’t the right approach to combating ID theft tax refund fraud, according to many industry observers. They believe what’s needed are more e ective measures of identifying and blocking fraudulent returns in the rst place, while preserving con- sumers’ option to receive refunds
volume 9 • spring 2016
While progress is being made to combat the problem of ID theft tax refund fraud, criminals are constantly honing their tactics and probing for weaknesses in the system—and stopping them will require the IRS and payment providers work together to do the same.
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