Remedies to addressing tax refund fraud small business owners should be aware of.
This is part 2 of 2, part 1 Beware of Refund Fraud, the IRS and Delayed Refunds in 2017– What happens when the IRS allows returns to be filed before they receive the third party information? Quite often it can be fraud.
Let’s go back to the delayed refunds for returns claiming the Earned Income Tax Credit and the Additional Child Tax Credit.
As I said, the IRS is going to hold any refunds on these tax credits until February 15th. This delay will assist the IRS by giving them the additional time needed to cross check the wages and withholdings to employer documents to avoid fabricated amounts.
They will hold back the entire refund, not just the portion related to those two credits. That restriction was placed in the new law. You can still file your return at the same time, as can your preparer, and the IRS will begin processing the returns on the processing date.
It is only the returns containing those two credits that will have refunds delayed until after February 15th.
All other returns can expect their refunds in less than 21 days. The IRS plans on informing the public of these changes in the next few months.
Many of the 2017 initiatives will not be visible to taxpayers. Some of those include:
1. W-2 Verification Code:
A test that will cover about 50 million forms in 2017. It will include a 16-digit code that will be entered into the tax software. This will be the most visible change.
2. Certain data elements on tax returns will be compared with data elements on corporate tax returns.
These elements have not been released for general knowledge.
3. The IDTTRF-ISAC will be launched.
That’s the new Identity Theft Tax Refund Fraud Information Sharing & Analysis Center. This will act as an early warning system collecting and analyzing identity theft schemes. That will be a very busy group as the thieves continue to get more and more sophisticated.
4. Twenty-three states have signed on
To a new process for financial institutions to identify questionable state tax refunds and return them to the states to be validated.
Twenty-three states have signed on to a new process for financial institutions to identify questionable state tax refunds and return them to the states to be validated.
Next- Even us tax preparers have come under attack by cyber-crooks.