The IRS is partnering with state tax authorities and software and financial companies on a new initiative to combat the sharp rise in fraudulent attacks on taxpayers and tax systems.
The new coalition against fraud and fraudulent activities (CASST) announced The campaign, announced by the IRS on August 16, is designed to raise awareness of new tax scams, develop new approaches to detect fraudulent tax returns early, and implement improved protection infrastructure for federal, state, and industry tax systems.
The new initiative is expected to be implemented by the 2025 tax filing season.
In 2023, the IRS reported 294,138 identity theft complaints and flagged more than a million tax returns for possible identity fraud. In January of this year, the IRS Security Summit – a group of IRS, state tax agencies and the nation’s tax industry dedicated to protecting against tax-related identity theft – warned of a rise in “new customer” email scams, which they said will likely be a major form of fraud during the 2024 tax season.
Other emerging tax fraud schemes include those that use artificial intelligence technology to generate lifelike images and videos to impersonate taxpayers and evade refunds.
“Across the spectrum of the tax system, we have seen a rising tide of fraud and schemes that seek to exploit taxpayers and find loopholes in government and industry defenses,” said IRS Commissioner Danny Werfel said about the new CASST initiative.
“This new collaborative approach will enable the private and public sectors to bring our combined weight to bear against this threat,” he said. “We will work more closely together, share information more quickly, respond quickly to threats, and quickly warn the public about new and emerging threats.”
“Our goal is to have a massive impact on this growing problem that is being spread through social media and by malicious actors,” he continued.
CASST aims to make structural changes to “fundamentally improve the ability to identify and stop fraud,” the IRS said, including improving the validation of electronic taxpayer identification numbers (EFIN) and taxpayer identification numbers (PTIN). This will help prevent so-called “ghost tax preparers” who prepare inflated tax returns for a fee without disclosing their role as tax preparers.
Further changes and improvements will be made in collaboration between government agencies and the private sector.
“The joint effort is particularly important because the group has seen cases where fraudsters look for vulnerabilities in government systems and the private sector to exploit,” the IRS said. “The joint effort will improve defenses in both the private and public sectors with the goal of making it harder for fraudsters to smuggle improper or false tax returns through the system,” the agency said.
CASST is an outgrowth of the Security Summit project, which was launched in 2015 to address the rise of tax-related identity fraud. According to the IRS, CASST will not replace the Security Summit project, but will be “closely modeled on it.”
CASST participants include the IRS, state tax authorities represented by the Federation of Tax Administrators, software and financial services providers, and trade groups such as the Council for Electronic Revenue Communication Advancement, the National Association of Computerized Tax Processors, and the American Coalition for Taxpayer Rights.
