5 Technology Trends Agencies Use to Combat Tax Refund Identity Fraud


Deborah Smith, MBA, LexisNexis Risk Solutions

Former Executive Director, Personal and Business Taxes, Ohio Department of Taxation

Thanks to advances in technology, tax return preparation and submission doesn’t have to be the chore it once was. The process of filling out complex tax forms has been simplified through the availability of multiple online tax software programs and mobile apps that make the once laborious procedure easier, more convenient, and more affordable. But with convenience comes safety issues. Fraudsters are always looking for a way to steal personal information and money that does not belong to them. The following technology trends and measures are examples of how tax agencies are using technology in 2017 to help taxpayers submit their tax returns in a secure and efficient manner:

Integrating Mobile Apps

A wide variety of mobile apps now allow you to check the status of your tax refund, make tax payments and receive updates from the Internal Revenue Service (IRS). You can also find answers to basic tax questions, tax filing checklists and other tools that can help you to determine the amount you owe to Uncle Sam or discover how much you will get back. There are also apps that allow you to take photos of your W-2’s, save receipts, record your time or mileage, or keep track of other expenses that can be imported into your tax returns. Filing tax returns has never been easier.

Implementing Multi-layered Identity Authentication

To combat the threat of identity theft tax fraud, a multi-layered identity authentication approach is necessary when mobile apps or online tax programs are used for submitting tax returns. This layered approach can help agencies to protect taxpayers through the analyzation of identities and devices used during the tax filing process. Multi-layered identity authentication can deter and prevent fraudsters from requesting a tax return in their state, decreasing the chance that multiple returns will be accepted.

Breaking down Data Silos

Breaking down data silos and incorporating third-party data sets helps to validate self-reported data and enables agencies to see across state boundaries. More and more tax agencies are cross-referencing multiple databases to verify the validity of a return before actually processing it. By sharing and analyzing multiple sources of data, identity theft returns can be detected quickly, minimizing any potential damage when this practice is in place.

Adapting with Dynamic Technology and Pattern Analysis

Agencies are hampered by a lack of sufficient manpower and resources needed to counteract the growing problem of tax refund identity fraud. By using dynamic technology, agencies can shift and adjust fraud rules when discovering new fraud schemes during tax season. Tax agencies are looking for the latest fraud scheme as fraudsters continue to evolve. Fine tuning fraud analysis techniques using the latest technology and pattern analysis save time so investigators can focus on the most important red flags.

Utilizing Visual Analytics

Agencies are now utilizing visual analytics that aggregate all of the data. Visual analytics make it easier for investigators to identify patterns and prioritize their investigative workflow, saving valuable time and resources. The visual technology also enables investigators to shift technology depending on new fraud schemes that they discover through pattern analysis during the tax season.

These top five technology trends, also highlighted in this eBook, are used by agencies to help balance security with convenience. Their goal is to make the tax filing process more streamlined for taxpayers, while making it more difficult for fraudsters to commit tax refund identity fraud. Stay tuned for tomorrow’s blog where we will cover tips you can take to guard against tax refund identity fraud.