The IRS is teaming up with state tax agencies and software and financial industries firms on a new initiative to combat steep upticks in fraudulent attacks on taxpayers and tax systems.
The new Coalition Against Scam and Scheme Threats (CASST) announced by the IRS on Aug. 16 will conduct outreach and education on emerging tax scams, develop new approaches to detect fraudulent filings upfront, and implement improved protective infrastructure for Federal, state, and industry tax systems.
The new initiative is set to be implemented by the 2025 tax filing season.
In 2023, the IRS reported receiving 294,138 complaints of identity theft and flagged more than one million tax returns for possible identity fraud. In January of this year, the IRS Security Summit – a group comprised of the IRS, state tax agencies and the country’s tax industry that works to protect against tax-related identity theft – warned about increases in “new client” email fraud, which they said would likely be a main form of fraud during the 2024 filing season.
Other emerging tax fraud schemes include those assisted by the use of artificial intelligence technologies to generate lifelike images and videos to impersonate taxpayers and steal refunds.
“Across the spectrum of the tax system, we’ve seen a rising tide of scams and schemes that try to exploit taxpayers and find gaps in government and industry defenses,” IRS Commissioner Danny Werfel said of the new CASST effort.
“This new collaborative approach will allow the private and public sectors to throw our combined weight against this threat,” he said. “We will do more to work closely together, share information faster, respond quickly to threats and quickly alert the public to new and emerging threats.”
“Our goal is to have a mass effect on this expanding problem that’s spread on social media and through bad actors,” he continued.
CASST is aiming to make structural changes to “fundamentally improve the ability to identify and stop scams,” said the IRS, including improving the validation of electronic filing identification numbers (EFIN) and preparer tax identification numbers (PTIN). This will help prevent what have been coined as “ghost preparers” who prepare inflated tax returns without disclosing their role as a preparer in exchange for a fee.
Other changes and improvements will be made as a collaborative effort between government agencies and the private sector.
“The combined effort is particularly important because the group has seen instances where scammers look for weak points in government systems and the private sector to exploit,” said the IRS. “The combined effort will improve defenses across both the private and public sector with a goal of making it more difficult for scammers to slip improper or false tax returns through the system,” the agency said.
CASST marks an outgrowth of the Security Summit effort launched in 2015 to stem growth in tax-related identity fraud. The IRS said CASST will not replace the Security Summit effort but will be “closely modeled” on it.
Participants in CASST include the IRS, state tax agencies represented by the Federation of Tax Administrators, software and financial services providers, and groups trade including the Council for Electronic Revenue Communication Advancement, the National Association of Computerized Tax Processors, and the American Coalition for Taxpayer Rights.
